COSTING FORMULAE
LEARNING CURVE
Learning curve equation =
y = axb
Where
y = Average time per unit for x units
A = Time required for first unit
x = Cumulative number of units produced
b = Learning coefficient
Logarithms Formulas
loga (p × q)
= loga p + loga q
loga (p / q)
= loga p – loga q
loga (pn)
= n loga p
loga 1
=0
loga 10 = 1
loga 100
=2
Learning curve index (b) = log (1- % decrease)
Log 2
CVP ANALYSIS AND MARGINAL COSTING
1. Sales-Variable Cost
= Contribution
= Fixed Cost + Profit
2. P/V ratio (or C/S ratio)
= Contribution ÷ Sales
= Contribution per unit ÷ selling price per unit
= Change in Contribution ÷ Change in Sales
3. Breakeven Point (BEP)
At BEP, Contribution
Thus, Break Even Sales (in sales value)
= Point where there is No Profit or No Loss
= Fixed Cost
= Fixed Cost ÷ P/V Ratio
4. Margin of Safety
5. Profit
6. Shut down point
= Sales – BEP Sales
= Contribution / P/V Ratio – Fixed Cost / P/V Ratio
= Profit / P/V Ratio
= Sales × P/V Ratio – Fixed Cost
= Margin of Safety Sales × P/V Ratio
= (Total fixed cost - Shut down costs) ÷ Contribution per unit
STANDARD COSTING
1. Direct Material Variance
1.1 Direct Material Total Variance = Standard Cost – Actual Cost
= [(SQ x SP) – (AQ x AP)]
1.2 Direct Material Price Variance = Actual quantity × (Standard price – Actual price)
= AQ × (SP – AP)
1.3 Direct Material usage variance = Standard price (Standard quantity – Actual quantity)
= SP × (SQ –AQ)
Material usage variance is further sub-divided into:
i) Material mix variance
ii) Material yield variance. (Or Material sub-usage variance)
1.3.1 Direct Material mix variance = (Revised standard quantity – Actual quantity) × Standard price
= (RSQ – AQ) × SP
1.3.2 Direct Material yield variance = (Standard Quantity - Revised Actual Quantity) × Standard
price
= (SQ – RSQ) x SP
1.4 Material Purchase Price Variance = (Standard Cost of Actual Quantity – Actual Cost)
= (SP – AP) x PQ
2. Labour Variance
2.1 Direct Labour Total Variance = Standard Cost – Actual Cost
= [(SH x SR) – (AH x AR)]
2.2 Direct Labour Rate Variance = Actual hour × (Standard rate – Actual rate)
= AH × (SR – AR)
2.3 Direct Labour Idle Time variance = Standard rate per hour x Actual idle hours
2.4 Direct Labour Efficiency variance = Standard cost of standard time for actual production Standard cost of actual time
= (SH x SR) – (AH x SR)
Labour efficiency variance is further sub-divided into:
i) Direct Labour mix variance or Gang variance
ii) Direct Labour yield variance
2.4.1 Direct Labour mix variance = (Revised standard hour – Actual hour) ×
Standard rate
= (RSH – AH) × SR
2.4.2 Direct Labour yield variance = (Standard Hour - Revised Actual Hour) ×
Standard rate
= (SH – RSH) x SR
3. Fixed Production Overhead Variance
3.1 Fixed Overhead Total Variance = Absorbed Fixed Overheads – Actual Fixed Overheads
3.2 Fixed Overhead Expenditure Variance = Budgeted Fixed overhead - Actual Fixed Overheads
3.3 Fixed Overhead Volume Variance = Absorbed Fixed overhead - Budgeted Fixed overheads
3.4 Fixed Overhead Capacity Variance = Budgeted Fixed overhead for Actual hour - Budgeted Fixed
overheads
3.5 Fixed Overhead Efficiency variance = Absorbed Fixed Overheads – Budgeted Fixed overhead for
Actual hour
3.6 Fixed Overhead Calendar Variance = Possible Fixed overheads – Budgeted Fixed overheads
3.7 Fixed Overhead Volume Variance = Absorbed Fixed Overhead – Budgeted Fixed Overheads
4. Variable Production Overhead Variance
4.1 Variable Overhead Total Variance = Standard Variable Overheads for production
– Actual Variable Overheads
4.2 Variable Overhead Expenditure Variance = Budgeted Variable overhead for actual
hours - Actual Variable Overheads
4.3 Variable Overhead Efficiency variance = Standard Variable Overheads for
production– Budgeted Variable overhead for
Actual hour
5. Sales Variances (Turnover or Value)
5.1 Sales Variance = Actual Sales – Budgeted Sales
= (AP x AQ) – (BP x BQ)
5.2 Sales Price Variance = Actual Sales – Standard Sales
= AQ x (AP – BP)
5.3 Sales Volume Variance = Standard Sales – Budgeted Sales
= BP x (AQ – BQ)
5.4 Sales Mix Variance = Standard Sales – Revised Standard Sales
= BP x (AQ – RAQ)
5.5 Sales Quantity Variance = Revised Standard Sales – Budgeted Sales
= BP x (RAQ - BQ)
6. Sales Variances (Margin)
6.1 Sales Margin Variance = Actual Margin – Budgeted Margin
= (AQ x AM) – (BQ x BM)
6.2 Sales Margin Price Variance = Actual Margin – Standard Margin
= AQ x (AM – BM)
6.3 Sales Margin Volume Variance = Standard Margin – Budgeted Margin
= BM x (AQ – BQ)
6.4 Sales Margin Mix Variance = Standard Margin – Revised Standard Margin
= BM x (AQ – RAQ)
6.5 Sales Margin Quantity Variance = Revised Standard Margin – Budgeted Margin
= BM x (RAQ - BQ)
7. Budget Ratios
7.1 Efficiency Ratio
= (Standard Hours ÷ Actual Hours) × 100
7.2 Activity Ratio
= (Standard Hours ÷ Budgeted Hours) × 100
7.3 Calendar Ratio
= (Available Working Days ÷ Budgeted Working Days) × 100
7.4 Standard Capacity Usage Ratio
Period) × 100
= (Budgeted Hours ÷ Max. Possible Hours in the Budgeted
7.5 Actual Capacity Usage Ratio = (Actual Hours Worked ÷ Maximum Possible Working Hours in a
Period) × 100
7.6 Actual Usage of Budgeted
= (Actual working hours ÷ Budgeted hours) × 100