Accounting cheat sheet
Product cost: Manufacturing cost includes direct material and labor + manufacturing overhead
(indirect material + labor +other cost)
Period cost: Classifications of nonmanufacturing costs: selling and administration.
Cost behavior refers to how a cost will react to changes in the level of activity (x). The most common
classifications are:
▫ Variable costs – change with activity. b Y = a + bX. Variable per unit is
constant
▫ Fixed costs – do not change with activity. a
▫ Mixed costs – a combination of variable and fixed costs. Y
contribution approach separates costs into fixed and variable categories. Sales Variable costs =
Contribution margin. Contribution margin Fixed costs = Net operating income.
Raw material= beginning inventory + Purchase raw material – ending inventory (we need to
subtract the indirect material from this)
Total manufacturing cost= direct material + direct labor+ manufacturing overhead
Cost of manufacturing= beginning inventory work in process + total manufacturing cost –
ending inventory work in process
Cost of goods sold= beginning inventory of finished sold + cost of manufacturing – ending
inventory of finished good.
PDOR= manufacturing overhead/ allocation base
Applied = PDOR * actual allocation base
Under/over applied= actual – applied
Selling amount= Total Manufacturing Cost + Markup amount
Selling Price per Unite= Total Selling Price/Number of Units
Manufacturing Overhead= total fixed cost + total variable costs
Unit product cost= total manufacturing cost/ units
Total job cost= direct labor + direct material + applied overhead
overhead applied to a particular job = Predetermined overhead rate x Amount of allocation
base incurred by the job. (This is for the ABC method, we add the overhead applied for every
job pool).
Activity-Based Costing
Activity cost pool: a cost bucket in which costs related to a particular activity are accumulated
Activity Measure: expresses how much of the activity is carried out and is used as the allocation
base for applying overhead costs
Activity Rate: a predetermined overhead rate for each activity cost pool
Activity rate=Activity Cost Pool/ Activity Measure= Estimated OH Cost/ Total Estimated
Activity; Activity rate= total cost of the pool/total activity
Expected Activity for Activity Rate= Estimated overhead cost/ expected activity for total
Profit= (sales- variable cost)-fixed expenses
Contribution Margin (CM) = Sales – Variable Cost
Contribution Margin per unit = Selling price – Variable Cost per unit (SO AT BREAKEVEN
POINT THE FIXED COST=CONTRIBUTION MARGIN)
Contribution Margin per unit = CM / Quantities
CM Ratio = Total CM / Total Sales
CM Ratio = CM per unit / Price per unit
Net Operating Income (Profit) = (Sales – Variable Cost) – Fixed Cost
• NOI = Contribution Marge – Fixed Cost
• NOI = ((Price x Quantities) – (Variable Cost x Quantities)) – Fixed Cost
• NOI = ((P-VC) x Q) – FC
• NOI = (CM per unit x Q) – FC
• NOI = (CM Ratio × Sales) – Fixed expenses
BE Sales in the number of units = Fixed Cost / CM per unit
BE Sales in $$ = Fixed Cost / CM Ratio
Sales at TP in units = (FC+TP)/CM
Sales at TP in $$ = (FC+TP)/CM Ratio
Margin of safety in dollars = Total sales - Break-even sales
Marigin of safety in units= Margin of safety in dollars/unit selling price
Margin of safety in ratio= Total sales - Break-even sales/ sales
Variable Expense Ratio= Variable expenses/sales
HIGH-LOW
Slope=y2-y1/x2-x1
Then use y=a+bx
Total fixed cost = Total cost – Total variable cost
OH applied under traditional= POHR*allocation base+ direct labor+ direct material
OH applied under ABC= activity* expected activity/ total unit+ direct material +direct labor
Traditional income statement
Sales-cost of good sold = gross margin
Gross margin- Selling and Admin. Expense=NOI
Contribution format
Sales-variable expenses=contribution margin
Contribution margin-fixed cost=NOI
