Scribd
Upload
681 views

Ma1 Formula Sheet Lecture Notes All Chapters

This document contains formulas for calculating key performance measures for cost, profit, and investment centers. It includes formulas to calculate cost per unit, efficiency ratio, capacity utilization ratio, production volume ratio, net profit margin, gross profit margin, and other cost/sales ratios. It also provides formulas for return on capital employed, residual income, assets turnover, inventory levels, materials purchase, units produced, direct and indirect labor costs, overhead absorption rates, and overheads absorbed.

Uploaded by

J&A Partners JAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
681 views

Ma1 Formula Sheet Lecture Notes All Chapters

This document contains formulas for calculating key performance measures for cost, profit, and investment centers. It includes formulas to calculate cost per unit, efficiency ratio, capacity utilization ratio, production volume ratio, net profit margin, gross profit margin, and other cost/sales ratios. It also provides formulas for return on capital employed, residual income, assets turnover, inventory levels, materials purchase, units produced, direct and indirect labor costs, overhead absorption rates, and overheads absorbed.

Uploaded by

J&A Partners JAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

lOMoARcPSD|6665945

MA1 - Formula Sheet - Lecture notes All chapters

Management Information - MA1 Study Text (Association of Chartered Certified


Accountants)

StuDocu is not sponsored or endorsed by any college or university


Downloaded by JAN LING ([email protected])
lOMoARcPSD|6665945

FORMULA SHEET - Management Information

Performance measures appropriate to cost centres

It is important to monitor the performance of cost, profit and


investment centres.

Performance measures for cost centres include:


• Cost compared to budget
• Cost/unit
• Efficiency, capacity utilisation, and production volume ratios

Cost per unit

Cost for producing one unit.

Cost per unit = Total costs / number of units produced

Efficiency ratio

Compares the budgeted output produced in standard hours


and actual hours worked.

Efficiency ratio =Standard hours of actual production x100


Actual hours worked

Downloaded by JAN LING ([email protected])


lOMoARcPSD|6665945

Capacity utilization ratio

Measures if planned utilization as been reached.

Capacity utilization ratio = Actual hours worked x100


Budgeted hours

Production volume ratio

Compares standard hours worked with budgeted hours.

Production v. ratio=Standard hours of actual production x100


Budgeted hours

Net profit margin

Measures the profit margin after all expenses are considered.

Net profit margin = Profit x 100


Sales

Gross profit margin

Measures the gross profit margin

Gross profit margin - Gross profit x 100


Sales

Downloaded by JAN LING ([email protected])


lOMoARcPSD|6665945

Cost/Sales ratios

If targets are not met, further ratios may be used.

Prodution costs ratio = Production cost of sales x 100


Sales

Material costs ratio= Material costs x 100


Sales

Labour costs ratio = Labour costs x100


Sales

Production overheads ratio= Production overheads x 100


Sales

Performance managment for investment centres

Return on capital employed/Return on investment shows


how much profit has been made in relation to the amount of
resources invested.

ROCE/ROI = Profit x 100


Capital employed

Residual income mesures the profit of an investment centre


after deducting a notional charhe or imputed interest cost.

Residual income = Profit x 100


Capital
Downloaded by JANemployed
LING ([email protected])
lOMoARcPSD|6665945

Assets turnover assesses how effectively an organisation’s


assets are being used to generate sales revenue.

Assets turnover = Sales revenue


Capital employed

This is not a percentage.

Inventory management

Inventory is the value of the goods that a business holds at a


point of time for sale to its customers.

Free inventory calculates the inventory not scheculed for


used.

Free inventory = Inventory on hand + inventory ordered -


inventory scheduled for use.

Inventory may be finished goods, work in progress or raw


materials.

In order to calculate finished goods we should produce the


formula is:

Units expected to be sold + Units required in closing inventory


- Units in opening inventory.

Downloaded by JAN LING ([email protected])


lOMoARcPSD|6665945

When from time to time managers decide that it is time to


reorder items for inventory they will also have to decide
quantities.

Materials purchase = materials usage+closing inventory


material - opening inventory material

The business must produce enough to cover its sales


volume and to leave enough in closing inventory.

Units produced = units sold + units in closing inventory -


units in opening inventory

The labour cost is often a large element of the cost of a


product and the remuneration methods and productivity of
the workforce can significantly affect the unit cost of a
product. Labour cost can be direct costs or indirect cost.

In order to calculate th direct labour costs the total number of


active hours worked must be known.

(Basic hours+overtime-IDLE) x hourly rate

In order to calculate indirect labour we must:

Calculate the overtime premium which is the difference


between overtime pay & basic rate:

Overtime premium = Overtime pay - Basic rate

Multiply by the number of hours worked:

Overtime premium x hours worked = Total(1)


Downloaded by JAN LING ([email protected])
lOMoARcPSD|6665945

Next step is to calculate IDLE time:

IDLE x Basic rate = Total (2)

And then, calculate the basic wage of the indirect workers:

Worked hours x basic rate = Total (3)

Next, calculate the overtimepay for indirect workers:

Overtime x Overtime pay = Total (4)

Total indirect labour costs=Total(1)+Total(2)+Total(3)+Total


4.

Overheads
Made up of indirect materials,indirect labour & indirect
expenses.Under absorption costing principles, production
overheads of a business are absorbed into the cost of each of
the products. The overheads absorption rate is:

OAR= Budgeted overheads / budgeted Level of activity

The overheads absorbed are:

OA= OAR x Actual activity

Downloaded by JAN LING ([email protected])

You might also like