ACCT 210 first one

Overhead rate per direct labor cost (%) Formula

Overhead in $ / direct labor cost $

Break Even Formula

Fixed Costs / CM

What is contribution margin? definition

The amount available to cover fixed costs and contribute to profits.

What type of cost remains the same per unit at every level of activity?

Variable cost.

Mixed costs definition and examples of mixed costs

change in total but not proportionately with changes in the activity level. Examples U Haul truck ($50 per day and .50 cents per mile) and utilities.

At the break-even point (WHAT equals WHAT?)

contribution margin equals total fixed costs.

Finding Contribution Margin Ratio with % variable costs of sales

(1-.%) / 1 =

Cost to produce one unit formula

(Direct materials + Direct Labor + Manufacturing Overhead) / # of units

Target Net Income Formula (Sales)

(Fixed Costs + Target Net Income) / Contribution Margin Ratio

Target Net Income Formula (Units sold)

(Fixed costs + Target Net income) / Unit Contribution Margin

Activity Base Overhead Rate Formula

(estimated Overhead per Activity) / (Expected use of cost drivers per activity) example $50 / 10 hours = $5 per hour

The activity-based overhead rate is computed by dividing...

...Estimated overhead per activity by expected use of cost drivers per activity.

Activity-based costing...

...is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers

To assign overhead costs to an individual product, the activity-based overhead rate is multiplied by...

...the number of cost drivers used per product.

Job Order Cost Flow (Account to account)

1.) Costs accumulate in " Manufacturing Costs" Account (DL,RM,MOH) 2.)Then assigned to "Work in Process" Account as they are manufactured. 3.) Once finished, the costs move to "Finished Goods Inventory" Account 4.) Once sold, costs move to "Cost of Goods Sold" Account

4 steps to Activity Based Costing

1.) Identify and classify Activities 2.)Identify cost driver (activity that correlates most to overall cost 3.) Compute activity-based overhead rate 4.) Allocate overhead costs to products

Period Costs

= Everything that isn't Direct materials, Direct Labor, or Manufacturing overhead. Meaning administrational costs, depreciation on shipping trucks, office equipment, and non-factory wages.

Product costs

=Direct materials + Direct Labor + Manufacturing overhead

Cost of Goods Sold formula

Beg. Finished Goods + Cost of goods manufactured + Cost of Goods available for sale - Ending finished Goods

Cost of Goods Manufactured formula

Beg. WIP inventory + All the costs directly connected to the manufacturing process - ending WIP inventory Beg WIP + DM (Beg Rm + Purchases - Ending Rm) + DL + MOH (Utilities, indirects, ect) - Ending WIP

Contribution Margin Ratio

CM per unit / Sales per unit

High-Low method of estimating variable costs

Change in Cost / Change in Activity

ACCUMULATING vs ASSIGNING COSTS

Costs related to Raw materials, Direct Labor, and Manufacturing overhead are first ACCUMULATED before they are put to a specific job, then once put to work they are ASSIGNED WIP (...and FG, and COGS)

Manufacturing Overhead

DR. Manufacturing Overhead Cr. Utilities payable Cr. Prepaid insurance Cr. Accounts payable (for repairs) Cr. Accumulated depreciation Cr. property taxes payable

Journal entry for when receiving purchased Raw Materials.

DR. Raw materials CR. Accounts payable

Finding Fixed Costs through Variable High-Low Costing method

Determine the fixed costs by subtracting the total variable costs at either the high or the low activity level from the total cost at that activity level.

Journal entry for Factory Labor Costs

Dr. Factory labor Cr. Factory Wages Payable Cr. Employer Payroll taxes Payable Cr. Fringe Benifits

During January, time tickets show that the factory labor of $6,700 was used as follows: Job 1 $2,380, Job 2 $1,780, Job 3 $1,550, and general factory use $990. Prepare a summary journal entry to record factory labor used.

Dr. WIP Inventory 5710 Dr. MOH 990 Cr. Raw Materials 6700

Margin of Safety Ratio Formula

Margin of saftey (Sales - break even sales) / sales

Contribution Margin Formula

Sales - Variable Costs (AKA revenue left over for fixed costs and profit)

CVP (Cost-Volume-Profit) Income Statement Accounts

Sales - Variable Costs = Contribution Margin CM - Fixed Costs = Net Income

Margin of Safety Formula

Sales - break even sales