All FORMULAS FOR ACC 301

NOI (net operating income)

(Unit Contribution Margin * Q) - FC

(SP × Q) − (VC × Q) − FC

Break-even

Q = (FC + Target NOI) / Unit CM

Margin of Safety

Actual Sales $ − Break-Even Sales $

MOS %

MOS in $ / Actual Sales $

Degree of Operating Leverage (DOL)

= Contribution Margin / Net Operating Income

% Change in NOI =

DOL × % Change in Sales

Key DOL insight:

companies with high DOL have high fixed costs, but a small rise in sales can boost profits heavily!

Applied MOH

= POR × Actual Allocation Base Used

POR =

= Estimated Total MOH ÷ Estimated Total Allocation Base (e.g., DL hours)

ROI =

Net Operating Income / Average Operating Assets

ROI =

Margin × Turnover

Residual Income (RI):

RI = NOI − (Avg Operating Assets × Minimum Required Rate of Return)

MCE =

= Process Time / Throughput Time

Throughput Time =

Process + Inspection + Move + Queue Time

Balanced Scorecard → Four perspectives

Financial → Customer → Internal Processes → Learning & Growth

Inventory Purchases Budget:

Required purchases at cost = Budgeted cost of goods sold (sales at cost) + Desired ending inventory at cost - Beginning inventory at cost

Production Budget

Required production in units = Budgeted sales in units + Desired ending inventory in units - Beginning inventory in units.

Units of raw materials to be purchased:

= Units of raw materials needed to meet production + Desired units of ending raw materials inventory - Beginning raw materials inventory

Quantity or Efficiency Variance =

= Standard Price (SP) × (Actual Quantity (AQ) - Standard Quantity (SQ)).

Price or Rate Variance =

Actual Quantity (AQ) × (Actual Price (AP) - Standard Price (SP)).

DM Quantity Variance =

Standard Price (SP) × (Actual Quantity (AQ) - Standard Quantity (SQ))

DM Price Variance =

Actual Quantity (AQ) × (Actual Price (AP) - Standard Price (SP))

DL Efficiency Variance =

Standard Rate (SR) × (Actual Hours (AH) - Standard Hours (SH))

DL Rate Variance =

Actual Hours (AH) × (Actual Rate (AR) - Standard Rate (SR))

VMOH Efficiency Variance =

Standard Rate (SR) × (Actual Hours (AH) - Standard Hours (SH))

VMOH Rate Variance =

Actual Hours (AH) × (Actual Rate (AR) - Standard Rate (SR))

Raw Materials (RM) Used

Beginning Inventory (RM) + Purchases − Ending Inventory (RM)

Cost of Goods Manufactured (COGM)

Beginning Inventory (WIP) + Total Manufacturing Costs − Ending Inventory (WIP).

Cost of Goods Sold (COGS)

Beginning Inventory (Finished Goods) + COGM − Ending Inventory (Finished Goods).

Activity Rate:

Estimated Total Cost for the Activity Pool ÷ Estimated Total Amount of the Cost Driver (Total Activity

Margin

Net Operating Income ÷ Sales

Turnover

Sales ÷ Average Operating Assets

overapplied MOH t-account

debit MOH credit COGS

underapplied MOH t-account

debit COGS credit MOH

change in FG

COGM - COGS

what does DOL measure?

A measure of how sensitive net operating income is to a percentage change in sales

in differential analysis what should you ignore?

sunk costs!

The Conflict: "I can't produce enough to meet demand. Which product should I prioritize?"

• The Strategy: You must calculate CM per unit of the constrained resource.

  • Example: If a machine takes 2 hours for Product A and 10 hours for Product B, you need to see who makes more money per hour of machine time, not per unit.