Summary of Important Equations Chapter 2 1 Total Product Cost = Direct Materials + Direct Labor + Manufacturing Overhead Total Product Cost 2. Per-Unit Product Cost = Number of Units Produced 3. Prime Cost = Direct Materials + Direct Labor 4. Conversion Cost = Direct Labor + Manufacturing Overhead 5. Beginning Direct Materials. Ending Inventory + Purchases— Usedin = Inventory of Materials Production of Materials 6. Gross Margin = Sales Revenue — Cost of Goods Sold 7. Operating Income = Gross Margin — Selling and Administrative Expense Chapter 3 1. Total Variable Costs = Variable Rate x Units of Output 2. Total Cost = Total Fixed Cost + Total Variable Cost 3. Total Cost = Total Fixed Cost + (Variable Rate x Units of Ourput) < High Point Cost — Low Point Cost 4. Vi Ke = oS arable Kare High Point Output — Low Point Output 5. Fixed Cost = Total Cost at High Point — (Variable Rate x Output at High Point) 6. Fixed Cost = Total Cost at Low Point — Warable| Rate x Output at Low Point)= Output at Low Point? Chapter 4 1. ing Income = (Price x Number of Units Sold) SE SI (Variable Cost per Unit x Number of Units Sold) — Total Fixed Cost Total Fixed Cost Eve its = —<—<—— 2. Break-Even Units = Pc Variable Cost per Unit 3, Sales Revenue = Price x Units Sold _ Total Variable Cost 4. Variable Cost Ratio = Sg : Unit Variable Cost 5. Variable Cost Ratio = =———ee . _. _ Total Contribution Margin 6. Contribution Margin Ratio = ——sa CO .. _ Total Contribution Margin 7. Contribution Margin Rao = ni =—— Total Fixed Expenses 8. Break-Even Sales = Conepution Margin Ratio 9. Margin of Safety = Sales — Breakeven Sales 3 _ Total Contribution Margin 10. Degree of Operating Leverage = Operating Income 11. Percentage Change in Profits = Degree of Operating Leverage x Percent Change in Sales Chapter 5 1. Predetermined Overhead Rate = =-stimated Annual Overhead _ Estimated Annual Activity Level 2. Applied Overhead = Predetermined Overhead Rate x Actual Activity Level 3. Total Normal Product Costs = Actual Direct Materials + Actual Direct Labor + Applied Overhead 4, Overhead Variance = Actual Overhead — Applied Overhead 5. Colic = Unadjusted COGS + Overhead Variance fote: Applied Overhead > Actual Overhead means Ovi lied ‘Overhead; subtract from COGS ceApplied Overhead < Actual Overhead means Underapplied Overhead; add to COGS) 6. Departmental Overhead Rate Estimated Department Overhead ~ Estimated Departmental Activity Level Chapter 6 i. Uni Cosema= POtalCost Equivalent Units 2. Units Started and Completed = Total Units Completed — Units Units Started = Units Started and Completed+ Units in EWIP Chapter 7 1. Consumption Ratio = Amount of Activity Driver per Produc Total Driver Quantity Total Overhead Costs 2. Overh pp rhead Rate = 7— 1 Direct Labor HoursChapter 8 1. Absorption Costing Product Cost = Direct Materials + Direct Labor + Variable Overhead + Fixed Overhead Variable Costing Product Cost = Direct Materials + Direct Labor + Variable Overhead Total Inventory- Related Cost = Ordering Cost + Carrying Cost Ordering Cost = Number of Orders per Year X Cost of Placing an Order Units in Order 2 Carrying Cost = Average Number of Units in Inventory X Cost of Carrying One Unit in Inventory E0Q = 2 X COX D/CC Reorder Point = Rate of Usage X Lead Time Safety Stock = (Maximum Daily Usage — Average Daily Usage) X Lead Time Average Number of Unitsin Inventory = Chapter 9 1. Units to Be Produced = Expected Unit Sales + Units in Desired Ending Inventory (EI) — Units in Beginning Inventory (BI) Purchases = Direct Materials Needed for Production + Direct Materials in Desired Ending Inventory — Direct Materials in Beginning Inventory Cash Available = Beginning Cash Balance + Expected Cash Receipts Ending Cash Balance = Cash Available — Expected Cash DisbursementsChapter 9 lL. Units to Be Produced = Expected Unit Sales - Ending Inventory EI Inventory (BI 2. Purchases = Direct Materials Needed for Proc + Direct Materials in Desired E: entory — Direct Materials in Begin - 3. Cash Available = Beginning Cash Balance — Expo Cash Receipt 4. Ending Cash Balance = Cash Available — Expected Cash Disbursemen Chapter 10 1. Cost per Unit = Total Cost/Total Units 2. Standard Cost per Unit = Quantity Standard & Price Standard 3. SQ = Unit Quantity Standard x Actual Output 4. SH = Unit Labor Standard x Actual Ourput 5. Total Variance = Actual Cost — Planned Cost = (AP X AQ) -(SP x SQ) 6. Total Materials Variance = Actual Cost — Planned Cast = (AP x AQ)—(SP x SQ) 7. MPV =(AP-SP)x AQ 8. MUV=(AQ- SQ) x SP 9. MPV =(AP x AQ) - (SP x AQ)10, MUV =(SPx AQ) — (SP x SQ) . Total Labor Variance = (AR X AH) ~ (SR x SH) 12. Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance 13, LRV=(AR x AH) — (SR x AH) 14. LRV=(AR - SR) x AH 18. LEV=(SR x AH) — (SR x SH) 16. LEV=(AH — SH) x SR 17. Target Cost per Unit = Expected Sales Price per Unit — Desired Profit per Unit Chapter 11 Abbrevations: FOH = Fixed Overhead VOH = Variable Overhead AH = Actual Direct Labor Hours SH = Standard Direct Labor Hours that Should Have Been Worked for Actual Units Produced AVOR = Actual Variable Overhead Rate SVOR = Standard Variable Overhead Rate i. 2. Actual Variable Overhead Actual Hours Variable Overhead Spending Variance = (|AH x AVOR)-(AH x SVOR) =(AVOR - SVOR) x AH Variable Overhead Efficiency Variance = (AH x SH) x SVOR Practical Capacity at Standard = SH, Budgeted Fixed Overhead Costs Practical Capacity Applied Fixed Overhead = SH x SFOR Total Fixed Overhead Variance = Actual Fixed Overhead — Applied Fixed Overhead Fixed Overhead Spending Variance = AFOH - BFOH Volume Variance = Budgeted Fixed Overhead — Applied Fixed Overhead = BFOH ~ (SH x SFOR) AVOR = SFOR =Chapter 12 Operating Income I. ROLS Average Operating Assets (Beginning Assets + Ending Assets) 2. Average Operating Assets = ———————— 2 3. Margin ‘Turnover ROI = Operating Income re Sales _ Sales Average Oper. Ss 4. Residual Income = Operating Income - (Minimum Rate of Return x Average Operating Asscts) 5. EVA = After-Tax Pperating Income — (Actual Percentage Cost of Capital x Total Capital Employed) Processing Time Processing Time + Move Time + Inspection Time + Waiting Time Chapter 13 1. Contribution Margin per Unit of Scarce Resource _ Selling Price per Unit — Variable Cost per Unit ~ Required Amount of Scarce Resource per Unit 6. MCE= 2. Price Using Markup = Cost per Unit + (Cost per Unit x Markup Percentage) 3. Target Cost = Target Price — Desired Profit Chapter 14 Original Investment 1. Payback Period = Annual Cash FlowAverage Income 2. Accounting Rate of Return = TTT tavestment 3. xpy =[SocR/(+a'] - = [Screg] -I=P-I 4. T= SCICE/(1 +8) 5. I= CF(df) Investment og =iCk— Annual Cash Flow 7. F=P(+i)" 8. P=F/(1+i)" Chapter 16 Liquidity ratios: A Current Assets 1. Current Rado = Crent Liabilities 3 .__ (Cash + Marketable Securities + Accounts Receivable) ee ee EE 4, Quick Ras Current Liabilities , i Net Sales 3. Accounts Receivable Tumover Ratio = “Average Accounts Receivable “Accounts Receivable 4. Average Accounts Receivable __ (Beginning Receivables + Ending Receivables) - 2 ‘ 365 Bp EI Receivables Turnover Ratio 6. Inventory Turnover Ratio = Cost of Goods Sold Average Inventory ) innii i tO) 9 Average Tnventory= (Beginning inventen = Ending Inventory, 8. Turnover in Days = B69 Inventory Turnover RatioLeverage ratios: 9. Times-Interest-Earned Ratio (Income Before Taxes + Interest Expense) Interest Expense Total Liabilities Total Assets Total Liabilities Total Stockholders’ Equity 10. Debt Ratio = 11, Debt-to-Equity Ratio = Profitability ratios: 12, Return on Sales = Nctincoine Sales _ Net Income + [Interest Expense(1 —Tax Rate)] 13. Rerurn on Total Assets= ~~~" Average TotalAssets T4A., ‘Average Tonal Ascets= (Beginning Total Ascat Ending Total Assets) 15. Return on Stockholders’ Equity ___(Net Income — Preferred Dividends) Average Common Stockholders’ Equity (Net Income — Preferred Dividends) * Average Common Shares Market Price per Share Earnings per Share 16. Earnings per Share = 17. Price-Earnings Ratio = Dividends per Common Share 18. Dividend Yield = ————*— EATS ™ Market Price per Common Share Common Dividends 19. Dividend Payout Ratio = (Net Income — Preferred Dividends)