Managerial Accounting 17-20

Cost of production report

Summarizes the production and cost data for a department by the the units the department is accountable for and the product cost incurred and completed and transferred out units

FIFO

First in first out

Direct Materials Cost per Equivalent Unit

Total Direct materials cost for the period/ total equivalent units of direct materials

Conversion cost

Total Conversion cost for the period/ total equivalent units of conversion costs

Variable Costs

Costs that vary in proportion to changes in the activity base. Dm and DL. Cost per stays the same, while total cost changes

Fixed costs

costs that remain the same in total dollar amount as the activity base changes. Total cost remains the same, while the cost per changes in proportion to the changes in the activity base

Total Cost equation

Variable cost + Fixed cost

Contribution margin

The excess of sales over variable cost

Contribution equation

Sales-var cost

Cost-volume profit analysis

is the examination of the relationships among selling prices, sales and production volume, cost, expenses, and profits

Contribution margin ratio or profit-volume ratio

The percentage of each sales dollar available to cover fixed costs and to provide operating income

Unit contribution margin

Useful for profit potential of proposed decisions

Equation for unit contribution margin

sales price per unit- var cost per unit

Break even point

The level of operations at which a company’s revenues and expenses are equal

Equation for break even

Fixed cost/unit contribution margin

If fixed cost increases how does it affect the break even point

it increases the break even point

If unit variable cost increases how does it affect the break even point

It increase the break even point

If unit selling price increases how does it affect the break even point

It decreases the break even point

To find sales required

fixed cost+ target profit / unit contribution margin

Profit volume chart

Plots the difference between total sales and total cost

Sales mix

The relative distribution of sales among the products sold by a company

Operating Leverage

Used to measure the impact of changes in sales on operating income

Operating leverage equation

contribution margin/operating income

Margin of safety

indicates the possible decrease in sales that may occur before an operating loss results

margin of safety equation

sales- sales at break even point - even point )/ sales

Process cost system

product costs in work in process

Job cost system

Product cost by job