Final Exam Flashcards
Raw materials inventory turnover
Raw materials used
______________________
Average raw materials inventory
Days’ sales in raw materials inventory
Ending raw materials inventory X 365
_________________________________
Raw materials used
Income statement
Sales
-COGS
______
Gross Profit
-Selling & administrative expenses
___________
Income
COGS full formula
DM used
+DL
+FO
——–
=Total Manufacturing Cost
+Beg. WIP
-End WIP
——–
=Cost of Goods Manufactured
+Beg. FG
-End FG
——–
COGS
Income statement Contribution Margin
Sales
-Variable COGS
-Variable selling & admin. expenses
____________
Contribution Margin
-Fixed overhead
-Fixed selling & admin. expenses
___________
Income
Special orders should be accepted when…
the price exceeds variable cost
Payback period
Initial investment
___________________
Annual net cash flow
Product Costs (Absorption Costing)
DM + DL + VOH + FOH
Product Costs (Variable Costing)
DM + DL + VOH (FOH = Period Expenses)
Building Blocks of Analysis
- Liquidity & efficiency - short-tern obligations and revenues
- Solvency - long-term obligations and revenues
- Profitability - provide financial rewards to attract and retain financing
- Market prospects - market expectations
Return on Investment
Income / Average assets
Direct expenses
can be traced to a specific department - sole benefit of that department
Indirect expenses
incurred for the joint benefit of at least two departments
Target Income units
Fixed Cost - Target Net Income
_____________________________
Contribution Margin
Target Income Sales
Fixed Cost - Target Net Income
_________________________________
Contribution Margin Ratio (CM/Sales)
