BASIC EQUATIONS Flashcards Preview

Managerial basic equations midterm > BASIC EQUATIONS > Flashcards

Flashcards in BASIC EQUATIONS Deck (13):
1

Direct materials used

=Raw materials beginning inventory + Purchases - Raw materials ending inventory

2

Cost of Goods Manufactured

= Direct materials used + Direct labour + indirect manufacturing costs (manufactory overhead) + beginning WIP - Ending WIP

3

Prime Costs

= Direct Material + Direct Labour

4

Conversion Costs

= Direct labour and Manufacturing Overhead

5

Total Cost

= Fixed costs + (variable rate
*Units of output)

6

Cost of Goods Sold

= beginning finished goods + cost of goods manufactured - End finished goods

7

operating leverage equation

contribution margin/ operating income

high OL- larger portion if costs are variable
low OL - means that larger portion of costs are fixed

8

3 types of costs that make up our COGM

direct materials
direct labour
manufacturing overhead

9

Job costing system

one that allocated overhead costs amounts all of the individuals "jobs" or "orders"

uses usage rate POHR (set at beginning of the period

10

Process costing system

one that allocated overhead costs to each step of the manufacturing process. this is for companies that have continuous production in large quantities, where it doesn't make sense to trace costs to individual identical units (average is good)

11

POHR (Predetermined Overhead Rate)

= expected overhead costs/expected activity level

12

overhead rate

actual total costs/actual usage

13

write of amount to COGS

decrease NI and Contribution margin