Formulas 1
Weighted Average Equivalent Units of Production (EUP)
Units completed and transferred out
+ EUP in ending WIP inventory
*Note: materials and conversion costs are calculated separately
Predetermined Overhead Rate (POR)
Estimated Overhead Costs divided by Estimated activity base
(+) Budgeted Ending Inventory
(-) Budgeted Beginning Inventory
= Inventory to be purchased
*Could use sales dollars, units, or cogs. Calculation is the same.
Cost of Goods Manufactured
Work in Process, Beginning
(+) Total manufacturing Costs
= Total Cost of work in process
(-) Work in process, ending
= Cost of goods manufactured
What are period costs?
Nonmanufacturing costs. Selling expenses and administrative expenses. They flow directly to the current income statement as expenses.
Sell as is or process further
Revenue from item processed further
(-) Revenue from item sold as is
= Incremental Revenue
(-) cost to process further
= Incremental Profit or Loss
*If # is positive you have profit and should process further
Cost of Goods Sold
Finished goods, beginning
(+) Cost of goods manufactured
= Goods Available for Sale
(-) Finished goods ending
= Cost of goods sold
Direct Materials
Raw Materials Inventory, Beginning
(+) Raw materials purchases
= Raw materials available
(-) Raw materials inventory, Ending
=Direct Materials Used
Cost of Goods Manufactured Short Formula
Beginning work in process inventory total
(+) Total manufacturing costs
(-) Ending WIP inventory
What are product costs?
Manufacturing costs. Direct materials, direct labor, and manufacturing overhead. Don't expense until product is SOLD.
Differential Costs
Current Costs to make
(-) Current Cost to buy
Retain or Replace an item
Sales proceeds of the current/old item
(+) operating savings from new item
(-) purchasing price of new item
= Net advantage of / Net disadvantage of replacing item
Eliminating a Segment or Product
Sales Revenue
(-) Eliminated (avoidable) costs
= Net effect total on company Income
Total Manufacturing Costs
Direct Materials
(+) Direct Labor
(+) Manufacturing Overhead
= Total manufacturing Costs
Actual costs < Standard Costs
Actual costs > Standard Costs
Actual costs < Standard Costs is FAVORABLE
Actual costs > Standard Costs is UNFAVORABLE
Cost of Goods Sold Short Formula
Beginning finished goods inventory
(+) COGM
(-) Ending finished goods inventory
Contribution Format Income Statement
Sales Revenue
(-) Variable Costs
= Contribution Margin
(-) Fixed Costs
= Income / Loss
Costs Per EUP
(Costs in beginning WIP inventory + Costs added during the period) / EUP
Fixed Costs + Variable Costs
Balanced Scorecard
Evaluates company performance from perspectives. Four most common are:
Financial
Customer
Internal Process
Learning and Growth
Adjusting Cost of Goods Sold
COGS - Overapplied Overhead
COGS + Underapplied Overhead
Gross Profit
Sales Revenue
(-) Cost of Goods Sold
= Gross Profit
Overhead Applied
POR x Actual amount of activity base for period
Cost Pool Activity Rate
Pool Overhead Costs divided by Number of Activities
The Master Budget
Sales Budget
Production Budget
Direct Materials, Direct Labor, Man. Overhead
Selling and administrative expense budget
Budgeted Income Statement
Capital Expenditure, Cash Budget, Budgeted Balance sheet