Formula sheet: Accounting
Chapter 2
Prime Cost = Direct material costs + Direct labour costs
Conversion Cost = Direct labour + Manufacturing overhead costs
Product costs = Cost of materials (if applicable) + Direct labour + Overheads
Chapter 3
Overhead cost = Plant wide rate x Units of the selected allocation base used by each product
𝐶𝑜𝑠𝑡 𝑐𝑒𝑛𝑡𝑟𝑒 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠
Overhead rate = 𝐶𝑜𝑠𝑡 𝑐𝑒𝑛𝑡𝑟𝑒 𝑑𝑖𝑟𝑒𝑐𝑡 𝑙𝑎𝑏𝑜𝑢𝑟 ℎ𝑜𝑢𝑟𝑠 𝑜𝑟 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 ℎ𝑜𝑢𝑟𝑠
Non-manufacturing overhead absorption rate =
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑛𝑜𝑛−𝑚𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑚𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔 𝑐𝑜𝑠𝑡
Chapter 5
𝐼𝑛𝑝𝑢𝑡 𝑐𝑜𝑠𝑡
Cost per unit of output = 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑜𝑢𝑡𝑝𝑢𝑡
Cost per unit of output (with scrap value) =
𝐼𝑛𝑝𝑢𝑡 𝑐𝑜𝑠𝑡 −𝑆𝑐𝑟𝑎𝑝 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑛𝑜𝑟𝑚𝑎𝑙 𝑙𝑜𝑠𝑠
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑜𝑢𝑡𝑝𝑢𝑡
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑 𝑐𝑜𝑠𝑡𝑠
Average cost per unit = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑢𝑛𝑖𝑡𝑠
Chapter 8
Contribution Margin = Sale Revenue – Variable Costs
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
Break-even points in units = 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 = Fixed costs / Sales – Variable costs
Break even production level =
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡−
Units sold for the target profit =
𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠+𝑇𝑎𝑟𝑔𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Total required revenue = Fixed Costs + Variable Costs + Target Profit
Profit-Volume ratio/ Contribution Margin ratio =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛
𝑆𝑎𝑙𝑒𝑠
Profit = (Sales revenue x PV ratio) – Fixed Costs
Break-even Sales Revenue (where profit = 0) =
Percentage Margin of Safety =
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
𝑃𝑉 𝑟𝑎𝑡𝑖𝑜
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑆𝑎𝑙𝑒𝑠−𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑆𝑎𝑙𝑒𝑠
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
Break-even number of batches = 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑏𝑎𝑡𝑐ℎ
Degree of operating leverage =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
𝑃𝑟𝑜𝑓𝑖𝑡
Break-even point (when unit costs not given):
or
Chapter 15
Budgeted expenditure = Budgeted direct labour hours x Budgeted variable overhead rate/h
Chapter 17
Standard cost = Quantity standard x Price standard
Product overhead cost = Hourly overhead rates x Standard hours (hours which should have
been used)
Material price variance = (SP – AP) x AQ
SP = Standard price
AP = Actual price
AQ = Actual quantity of materials purchased
Material usage variance = (SQ – AQ) x SP
SQ = Standard quantity
Total material variance = SC – AC
SC = Standard material cost
AC = Actual cost
Wage rate variance = (SR-AR) x AH
SR = Standard wage rate per hour
AR = Actual wage rate
AH = Actual number of hours worked
Labour efficiency variance = (SH – AH) x SR
SH = Standard labour hours for actual production
Total labour variance = SC – AC
SC = Standard labour cost
AC = Actual labour cost
Total variable overhead variance = SC - AC
SC = Standard variable overheads charged to production
AC = Actual variable overheads incurred
Variable overhead expenditure variance = BFVO – AVO
BFVO = Budgeted flexed variable overheads
AVO = Actual direct labour hours of input and the actual variable overhead costs incurred
Variable overhead efficiency variance = (SH – AH) x SR
SH = Standard hours of output
AH = Actual hours of input
SR = Standard overhead rate
Fixed overhead expenditure variance = BFO – AFO
BFO = Budgeted fixed overheads
AFO = Actual fixed overhead spending
Total sales margin variance = Actual sales revenue – Standard variable cost of sales –
Budgeted contribution
Sales margin price variance = (Actual selling price – Standard selling price) x Actual sales
volume
Fixed overhead rate per unit of output = Budgeted fixed overheads / Budgeted activity
Budgeted fixed overheads
Fixed overhead rate per standard hour of output = 𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 ℎ𝑜𝑢𝑟𝑠
Total fixed overhead variance = Standard fixed overhead charged to production – Actual
fixed overhead incurred
Volume variance = (Standard hours for actual production – Budgeted hours for budgeted
production) x Standard fixed overhead rate
Volume efficiency variance = (Standard hours of output – Actual hours of input) x Standard
fixed overhead rate
Volume capacity variance = (Actual hours of input – Budgeted hours of input) x Standard
fixed overhead rate
Production volume ratio =
Standard hours of actual output
Production efficiency ratio =
Capacity usage ratio =
Budgeted hours of output
Standard hours of actual output
Actual hours worked
Actual hours worked
Budgeted hours of input
Total materials cost variance = (actual production x standard material cost per unit of
production) - actual materials cost
Total labour cost variance = (actual production x standard labour cost per unit of
production) - actual labour cost
Fixed overhead volume variance = (Standard hours for actual production - budgeted hours
for budgeted production) x standard fixed overhead rate
Additional:
Ending RE = Beg RE + Net income – Dividends
Sales Volume Variance (where absorption costing is used) = (Actual Unit Sold –
Budgeted Unit Sales) x Standard Profit Per Unit
Sales Volume Variance (where marginal costing is used) = (Actual Unit Sold – Budgeted
Unit Sales) x Standard Contribution Per Unit
Direct material standard = standard quantity × standard prices
Direct labour standards = standard quantity × standard prices
Total actual cost = Qa x Pa
Price variance =
Flexible budget based on actual use =
Usage variance =
Total standard cost =
Total materials variance =
Symbols: a = Actual; s = Standard; Q = Quantity; P = Price
Normal loss = Good ouput required / (1-Loss rate)
Equivalent units (Weighted average)
Equivalent units (FIFO)
=> Don’t forget to substract
Opening work in process
Equivalent cost per unit = Amount of (direct materials or conversion costs) / Equivalent
units
Budgeted profit :
(i) add back adverse variances and to deduct favourable variances to actual profit to arrive at
budgeted profit. And (ii) to avoid double counting : The fixed overhead volume variance =
fixed overhead capacity variance + fixed overhead efficiency variance