Formulas

School: Rutgers University - Course: ACCOUNT 275 - Subject: Accounting

Flow of Inventory DM InventoryWIP InventoryFinished Goods Inventory Beginning InventoryBeginning InventoryBeginning Inventory DM PurchasedDM UsedCost of Goods Manuf. DL MOH Ending InventoryEnding InventoryEnding Inventory DM UsedManuf. Costs IncurredCOGS Gross Margin= Revenue - COGS Operating Income= Revenue - COGS - Period Costs Period Costs include R&D, Design, Marketing, Distribution, Customer Service Period costs have variable and fixed costs: VCU = VC/units soldFCU = FC/units manufactured Prime Cost= DM + DL Conversion Costs= DL + MOH Normal Costing= uses budgeted indirect cost rates Actual Costing= uses actual cost rates Applied MOH= (Budgeted MOH/Budgeted Cost Allocation Base) * Actual Cost Allocation Base Under/over-applied MOH= Actual MOH - Applied MOH -Adjusted allocation approach - restates all overhead entries with actual overhead costs instead of budgeted overhead -Proration approach- spreads under/over allocated overhead among WIP, Finished Goods, and COGS oMOH in account balance / total MOH in all account balance = % to allocate -Write of COGS approach Misc. Notes -Transfer in = manufacturing cost -Transfer out = selling cost Contribution Margin CM= (SP*Q) - (VC*Q) CM= Revenue - VC CM= Revenue * CM% CM= CM per unit * # units sold CM%= CM / Revenues CM%= CM per unit / SP per unit Change in CM= CM% * change in revenues Operating Income Op Income= (SP * Q) - (VCU * Q) - FCor(SP-VCU) * Q - FC Op Income= (CM% * Revenues) - FC

Break Even Points BEP occurs when revenues = total costs, operating income = 0 BE Revenues= FC / CM% BE Units=FC / CM per unit Target Operating Income Revenues to earn Target Op Income= (FC + Target Op Income) / CM% Target Units for Target Op Income= (FC + Target Op Income) / CM per unit Income Tax & Target Net Income Net Income= Operating Income - Income Tax Net Income= Operating Income + Non-Op Income - Non-Op Costs - Income Tax Target Net Income= Target Op Income - (Target Op Income * Tax Rate) Target Net Income= Target Op Income - (1 - Tax Rate) Target Units for Target Net Income= (FC + Target Op Income) / CM per unit Target Op Income= Target Net Income / (1 - Tax Rate) Margin of Safety Margin of Safety= Budgeted (or actual) Revenues - BE Revenues Margin of Safety in Units= Budgeted (or actual) Sales Quantity / BE Quantity Margin of Safety %= Margin of Safety $ / Budgeted (or actual) Revenues Sales Mix BEP= FC / CM per bundle CM% for Bundle= CM for bundle / Revenue of bundle BE Revenues= FC / CM% for bundle BE Units= BE Revenues / Revenue per bundle