Cost Accounting & Budgeting – Core Formulas (Page 1)

32 Q&A flashcards summarising essential cost-accounting and budgeting equations from the lecture notes so students can test recall of definitions, variance analysis, break-even, depreciation, and investment appraisal formulas.

How do you calculate a Full Cost (Absorption Costing) price per unit?

Full Cost price per unit = (Total Fixed Costs ÷ Normal Volume) + Variable Cost per Unit

What is the formula for the Production-Volume Variance (PVV) under absorption costing?

PVV = (Actual Production − Normal Production) × Standard Fixed Cost Rate per Unit

How is the Sales Volume Result (SVR) computed in absorption costing?

SVR = Quantity Sold × (Sales Price − Full Cost per Unit)

Under direct costing, how is profit determined?

Direct-Costing Profit = Total Contribution Margin − Total Fixed Costs

How do you compute the contribution margin in direct (variable) costing?

Contribution Margin = Quantity Sold × (Sales Price − Variable Cost per Unit)

What is the break-even point in units?

Break-Even Units = Total Fixed Costs ÷ (Sales Price per Unit − Variable Cost per Unit)

How do you express the break-even sales level in currency?

Break-Even Sales = Total Fixed Costs ÷ Contribution Margin Ratio per Unit

How is the Sales Volume Variance (SVV) calculated?

SVV = (Actual Sales Volume − Budgeted Sales Volume) × Budgeted Profit Margin per Unit

What overhead rate is used in direct-materials job costing?

Overhead Rate = Indirect Overhead Costs ÷ Direct Material Costs

How do you determine the Sales Price Variance (SPV)?

SPV = (Actual Sales Price − Budgeted Sales Price) × Actual Quantity Sold

What is the general contribution-margin formula per unit?

Contribution Margin per Unit = Sales Price per Unit − Variable Cost per Unit

Give the reducing-balance depreciation factor formula

Reducing -Balance Factor = 1 − (Scrap Value ÷ Purchase Price)^(1/N)

How is depreciation expense for year x calculated using the declining-balance method?

Depreciation (Year x) = Declining-Balance Factor × Book Value at Start of Year x

How is depreciation computed under the sum-of-years-digits method?

Depreciation (Year k) = (Remaining Life in Years ÷ Sum of the Years’ Digits) × (Purchase Price − Scrap Value)

What is the standard production cost per unit?

Standard Production Cost = Variable Cost per Unit + (Total Fixed Cost ÷ Normal Production)

Provide the formula for a standard full cost price.

Standard Full Cost Price = Variable Cost per Unit + (Total Fixed Cost ÷ Expected Production)

How do you calculate total cost per unit?

Total Cost per Unit = Fixed Cost per Unit + Variable Cost per Unit

What is the expression for budgeted profit?

Budgeted Profit = Units Planned × (Sales Price − Variable Cost) − Fixed Costs

Give the formula for an efficiency variance based on labour or material hours.

Efficiency Variance = (Standard Hours − Actual Hours) × Standard Hourly Rate

How is an efficiency variance expressed when based on quantity?

Efficiency Variance = (Standard Quantity Allowed − Actual Quantity Used) × Standard Price

State the price variance formula.

Price Variance = (Standard Price − Actual Price) × Actual Quantity Used

How is the fixed-cost variance computed?

Fixed Cost Variance = Budgeted Fixed Cost − Actual Fixed Cost

What relationship links variable-cost variance, efficiency variance, and price variance?

Variable Cost Variance = Efficiency Variance + Price Variance

Define the Accounting Rate of Return (ARR).

ARR = Average Annual Profit ÷ Average Investment

How do you find average investment for ARR?

Average Investment = (Initial Investment + Scrap Value) ÷ 2

Present the basic Net Present Value (NPV) formula for an annuity with a scrap value.

NPV = [Annual Cash Flow × (1 − 1⁄(1 + r)^n) ÷ r] + Scrap Value ÷ (1 + r)^n − Initial Investment

How is flexed revenue calculated in a flexible budget?

Flexed Revenue = Actual Units Sold × Budgeted Selling Price per Unit

Provide the formula for flexed variable costs.

Flexed Variable Costs = Actual Units × Standard Variable Cost per Unit

Which costs remain unchanged when flexing a budget?

Fixed Costs remain the same as in the Master Budget

How is master-budget revenue determined?

Master-Budget Revenue = Planned Sales Units × Standard Selling Price

How do you compute budgeted (standard) costs in the master budget?

Budgeted Costs = Planned Output Units × Standard Input Cost per Unit