Managerial Accounting: Cost Calculations and Cost Behavior Analysis

What is the formula for total product cost?

Direct Materials + Direct Labor + Manufacturing Overhead

What is the formula for prime cost?

Direct Materials + Direct Labor

What is the formula for conversion cost?

Direct Labor + Manufacturing Overhead

How do you calculate the cost of direct materials used?

Beginning Materials Inventory + Purchases - Ending Materials Inventory

What is the formula for Cost of Goods Manufactured (COGM)?

Direct Materials Used + Direct Labor + Manufacturing Overhead + Beginning Work in Process - Ending Work in Process

How is Cost of Goods Sold (COGS) calculated using inventory balances?

Cost of Goods Manufactured + Beginning Finished Goods Inventory - Ending Finished Goods Inventory

What is the primary difference between absorption costing and variable costing regarding product costs?

Absorption costing includes fixed manufacturing overhead in product costs, while variable costing does not.

How is the per-unit product cost calculated under absorption costing?

Direct Materials + Direct Labor + Variable Overhead + Fixed Overhead per unit

How is the per-unit product cost calculated under variable costing?

Direct Materials + Direct Labor + Variable Overhead

What is a fixed cost?

A cost that remains constant in total regardless of changes in activity level.

What is a variable cost?

A cost that varies in total in direct proportion to changes in activity level.

What is a mixed cost?

A cost that contains both fixed and variable components.

What is a step cost?

A cost that remains constant over a specific range of activity and then jumps to a new level when that range is exceeded.

How is a computer service agreement with a base monthly fee and an hourly rate classified?

Mixed cost

How is the cost of beer for a bar classified?

Variable cost

How is rent for a dental office classified?

Fixed cost

How are the salaries of dental hygienists in an office where one hygienist handles a fixed capacity of patients classified?

Step cost

How is electricity cost with a base billing charge plus usage-based fees classified?

Mixed cost

In absorption costing, how are fixed selling and administrative expenses treated?

They are treated as period costs and deducted from gross margin.

In variable costing, how are fixed manufacturing overhead costs treated?

They are treated as period costs and deducted from the contribution margin.

What is the value of ending finished goods inventory?

Units in ending inventory multiplied by the per-unit product cost.

What is the formula for unit cost of a produced item?

Total product cost divided by the number of units produced.