ACCT 211 (Quiz 3)

Sales budget

Sales units X Selling price = Expected sales revenue

Production budget

Sales units + Desired end finished goods - Beg. finished goods = Required production units

DM budget

Required production units

X DM required per unit

= DM Required for production

+ Desired ending DM inventory

- Beginning DM inventory

= DM to be purchased (units)

X Cost per unit of DM

= Cost of DM purchases

DL budget

Units to be produced X DL hours per unit X DL cost per hour = Total DL Cost

Total unit cost

Quantity X Unit cost of DM, DL, and MOH. Total it up

COGS

Units sold X Total unit cost

Budgeted income statement

Sales

- COGS

= Gross Profit

- S+A expenses

- Interest expense

= Income before taxes

- Income tax expense

= Net Income

Cash reciepts

expected receipts from recurring revenue, expected interest and dividends

Cash disbursements

expected cash payments for DM, DL, MOH, S+A, income tax, investments

Financing

expected borrowings and repayments of borrowed funds plus interest

Nonmanufacturing budget (merchandisers)

Budgeted costs + Desired end inventory - Beg. inventory = Req. merchandise purchases

Expected sales revenue

Sales units X Selling price

Required production units

Sales units + Desired end finished goods - Beg. finished goods

DM required for production

Required production units X DM required per unit

DM to be purchased (units)

DM req. for production + Desired End DM - Beg. DM

Cost of DM purchases

DM to be purchased (units) X Cost per unit of DM

Cash budget

Beg balance

+ Cash receipts/collections

= Total available cash

- Cash displacements

= Excess available cash

+ Borrowings

- Repayments

= Ending cash balance

VC per DL hour

Total budgeted cost / Budgeted DL hours

Cost equation

VCx + FC

Controllable cost def.

cost which manager has control

Noncontrollable costs def.

costs incurred indirectly

Ctrl. M

CM - controllable FC

ROI

Ctrl. M / Avg. Operating Assets

New Ctrl. M

(increase in sales X (old CM/old sales)) + old Ctrl. M

Reduce VC by $____ means…

add that amount to the Ctrl. M

Total material variance

(AQ X AP) - (SQ X SP)

Price variance

(AQ X AP) - (AQ X SP)

Quantity variance

(AQ X SP) - (SQ X SP)

Total labor variance

(AH X AR) - (SH X SR)

Labor price variance

(AH X AR) - (AH X SR)

Labor quantity variance

(AH X SR) - (SH X SR)

Labor total overhead variance

MOH costs - (SQ X predetermined overhead rate)

Reporting variances (effect on U or F)

U —> increase COGS, decrease GP

F —> decrease COGS, increase GP

How many units were produced during the period? (given standard costs and variances)

Total standard cost / standard cost per unit

Total overhead variance

Actual - Applied (standard)

Cash payback period

investment / net annual cash flow

NPV

Cash flow X PV decimal

(Do PV for salvage if needed)

= Total PV

- Initial investment

= NPV

Profitability index

Total PV / Initial investment

Annual ROR

Annual Net Income / Avg. Investment

• Add depreciation expense to outflows if given

• Avg. Investment = (investment + salvage value) / 2)

Depreciation Expense

(Investment - Salvage Value) / Estimated life (years)

Annual NI for ROR

Cash Flow - Depreciation Expense