Chapter 1: Managerial Accounting and Cost Concepts
1. Total Cost = Fixed Costs + Variable Costs
o Used to determine the total expenses associated with production.
2. Variable Cost per Unit = Total Variable Costs / Total Units Produced
o Used to assess how costs change with production volume.
3. Fixed Cost per Unit = Total Fixed Costs / Total Units Produced
o Used to allocate fixed costs per unit of production.
4. Prime Cost = Direct Materials + Direct Labor
o Measures direct costs associated with production.
5. Conversion Cost = Direct Labor + Manufacturing Overhead
o Represents the cost of converting raw materials into finished goods.
Chapter 2: Job-Order Costing
6. Predetermined Overhead Rate = Estimated Total Manufacturing Overhead / Estimated
Total Allocation Base
o Used to allocate overhead costs to jobs.
7. Applied Overhead = Predetermined Overhead Rate × Actual Allocation Base
o Used to determine the amount of overhead assigned to a job.
8. Total Job Cost = Direct Materials + Direct Labor + Applied Overhead
o Used to calculate the total cost of a specific job.
9. Cost per Unit = Total Job Cost / Total Units Produced
o Used for pricing and cost analysis.
Chapter 3: Process Costing
10. Equivalent Units of Production (EUP) = Units Transferred Out + (Ending WIP
Inventory × % Completion)

Used to measure production activity in terms of completed units.
11. Cost per Equivalent Unit = (Cost of Beginning Inventory + Cost Added During the
Period) / Equivalent Units of Production

Used to determine the cost assigned to each unit.
12. Total Cost Transferred Out = Equivalent Units Completed × Cost per Equivalent Unit
o Used to calculate the cost assigned to finished products.
Chapter 4: Cost-Volume-Profit (CVP) Relationships
13. Contribution Margin (CM) = Sales Revenue - Variable Costs
o Indicates the amount available to cover fixed costs and generate profit.
14. Contribution Margin per Unit = Selling Price per Unit - Variable Cost per Unit
o Shows how much each unit contributes to covering fixed costs.
15. Contribution Margin Ratio = Contribution Margin / Sales Revenue
o Shows the proportion of sales revenue that contributes to covering fixed costs and
generating profit.
16. Break-Even Point (Units) = Total Fixed Costs / Contribution Margin per Unit
o Determines the sales volume required to reach zero profit.
17. Break-Even Point (Dollars) = Total Fixed Costs / Contribution Margin Ratio
o Determines the revenue required to reach zero profit.
18. Margin of Safety = (Current Sales - Break-Even Sales) / Current Sales
o Measures how much sales can drop before losses occur.
19. Target Profit (Units) = (Total Fixed Costs + Target Profit) / Contribution Margin per
Unit
o Determines sales volume needed to achieve a desired profit.
20. Operating Leverage = Contribution Margin / Net Operating Income
o Measures how sensitive net operating income is to changes in sales.
Chapter 5: Absorption Costing vs. Variable Costing
21. Net Operating Income (Absorption Costing) = Gross Margin - Selling &
Administrative Expenses
o Includes fixed manufacturing overhead as part of the product cost.
22. Net Operating Income (Variable Costing) = Contribution Margin - Fixed Costs
o Excludes fixed manufacturing overhead from product cost and treats it as a
period expense.
23. Fixed Manufacturing Overhead Deferred in Inventory = (Units Produced - Units
Sold) × Fixed Overhead per Unit
o Represents fixed costs carried in inventory under absorption costing.
24. Reconciliation of Absorption and Variable Costing Income = Variable Costing NOI +
Fixed Overhead Deferred in Inventory
o Explains differences in reported profits under the two methods.
Chapter 6: Activity-Based Costing (ABC)
25. Activity Rate = Total Cost of Activity / Total Activity Base
o Used to assign costs to products based on activity consumption.
26. Cost Assigned to Product = Activity Rate × Activity Base Used
o Determines cost allocation under ABC.
27. Overhead Cost per Unit = Total Overhead Assigned / Total Units Produced
o Calculates overhead cost per unit under activity-based costing.
28. Segment Margin = Segment Revenue - Variable Expenses - Traceable Fixed Expenses
o Used to evaluate the profitability of business segments.
This sheet now contains all essential formulas from chapters 1 through 6, including inverse
calculations and explanations on their use cases.