Acct 622 Study Guide - Core 2006 v1.4

Acct 622 Study Guide - Core 2006 v1.4 - ACCT 622 Study...

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ACCT 622 Study Guide E. Belashchenko Inc. Break Even point : Sales – TC = Sales – FC – VC = 0 CONTRIBUTION MARGIN (CM): = Revenue – Variable Costs - CM/unit = Price/unit – VC/unit - CM/unit = (Revenue – VC (man.; selling; admin))/#units - Break Even Formula = Fixed Costs/(CM/unit) Break Even Units = FC/ (CM/unit) CM/unit = FC/Break Even Units # - Break Even Revenue = Fixed Costs/CM Ratio = Fixed Costs/ (1-VC%); - Maximize CM per unit – look for the biggest combination of # of units per hour * profit per unit - GROSS MARGIN: = Revenue – COGS - Note: FC is fixed; No Sunk Cost; Look at Opportunity cost; Depreciation still counts as fixed cost. - SAMPLE PROBLEM: Keep an eye for sunk costs. Example: something already manufactured, but damaged and will expire – the manufacturing costs are sunk, selling expense is all that needs to be covered. - SAMPLE PROBLEM: if can make elsewhere, and there is a savings in overhead per unit – reduce the given overhead; further, if there is a lump fixed overhead savings, figure out per unit, and reduce the per unit fixed overhead by that amount. Job Costing: - Cost of job = cost/hour * # hours - Cost/hour = Direct Labor/hour + Overhead/hour - Job Price = Billing Rate * #hours - Costs = Direct Costs + Indirect Costs o Identify DC and IC / Allocate OH - Billing Rate/hour = Cost/hour + Profit/hour OVERHEAD APPLICATION if projected < actual underapplied Incremental Effect : Difference between 2 alternatives Typical Accounting performance Measures: - Acct. Income Opportunity profit (not Net Income) - ROI or ROA ROI = Inc./Inv. Base o Income = (Price * #units produced – FC – VC) o ROI = Income / ((Inv BEG +Inv END )/2) = % - Residual Income RI I- (cap charge * Inv. Base) - EVA – “Adjusted Income” – (WACC% [Total Assets – Current Liabilities]) o WACC (Based on market value of equity) = [Long Term Debt/ (LTD+Market Value of Equity)*LTD % rate] + [Market Value of Equity Capital/(LTD+Market Value of Equity)*%Equity Capital Cost] = WACC % BUDGETED OVERHEAD: ( predictable ) - Budgeted OH Rate = Budget OH/Budget Vol. of Allocation Base ( Allocation base example: machine hours) COSTING SYSTEMS COST ANALYSIS TABLE: AO AI AP EO SI SP Labor Mat. OH Steps: 1. Summarized units in inventory 2. Compute EO, SI, SP, AO, AI, AP 3. Compute value of units in COGS 4. Compute variances 5. Close or prorate variances 6. Compute COGS after adjusting for variances Actual Normal Standard Direct (DL+DM) AO*AI*AP AO*AI*AP AO*SI*SP Man. OH AO*AI*AP AO*AI*SP AO*SI*AP VARIANCES UNDER THREE METHODS: Actual Normal Standard DL/DM Never Never AO*AI*AP – AO*SI*SP MOH Never AO*AI*AP - AO*AI*SP AO*AI*AP – AO*SI*SP Overhead Variance: Applied > Actual Favorable Applied < Actual Unfavorable - Variance needs to be closed out at end of period - Can prorate variance among WIP (Work In Progress), FG (Finished Goods), COGS accounts; PROBLEM EXAMPLE 1: - Actual Costing of Project Actual Materials; Actual Labor; Actual OH
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This note was uploaded on 02/22/2012 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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Acct 622 Study Guide - Core 2006 v1.4 - ACCT 622 Study...

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