ma part b Flashcards
(45 cards)
Variable costing
adds together direct materials, direct labor, and variable overhead costs in product costs
absorption costing
adds together direct materials, direct labor, and both variable and fixed overhead costs in product costs
Required for external financial reporting under GAAP
Units produced exceed units sold
Production > sales
absorption costing > variable costing
Fixed OH is not in inventory for variable costing
Units produced are less than units sold
Production < sales
Absorption costing < variable costing
Difference from the fixed OH
equation for absorption costing i/s
sales revenue
- COGS (DM + DL + variable OH + fixed OH)
= gross profit
- non manufacturing costs (selling exp. + admin exp.)
= net income
equation for variable costing i/s
sales revenue
- variable costs (DM + DL + variable OH + variable s&a exp.)
= contribution margin
- fixed costs (fixed OH + fixed s&a exp.)
= net income
Make or buy
select the action with the lower cost
2 columns comparing costs
Sell or process
select the action with the higher income
2 columns measuring incremental rev, inc. costs, inc. income
scrap or rework
Decision rule: select the action with the higher income
2 columns finding the income for scrap and rework
Keep or drop
Decision rule: select the action with the higher income
special order
Decision rule: Accept the special offer if income increases (reject it if income decreases)
2 columns measuring incremental rev, inc. costs, inc. income
Master budge
a formal comprehensive plan that contains several interconnected budgets
starts with sales budget
Sales budget
budgeted unit sales
* budgeted sales price
= budgeted sales
production budget
budgeted unit sales
+ desired ending FG in units
= units to be available for sale
-beginning FG inventory in units
=budgeted total units needed to be produced
direct materials budget
budgeted total units needed to be produced
* budgeted requirements per unit
= materials needed for production
+ desired ending materials inventory
= total required materials
- beginning materials inventory
= materials needed to be purchased
* materials cost per measure
= budgeted total cost of direct material purchases
direct labor budget
budgeted production in units
* DL requirements per unit
= total DL hours needed for production
* wage rate (per DL hour)
= total cost of DL
factory overhead budget
budgeted production in units
* DL requirements per unit
= total DL hours needed for production
* variable OH rate
= budgeted variable OH
+ budgeted fixed OH
= budgeted total factory OH
cash budget
beginning cash balance
+ cash collections
- cash disbursements
= preliminary cash balance
+ / -: financing (for loan)
= ending cash balance
budgeted income statement
sales
- cogs
- s, g, a expenses
= operating profit
- interest expense
= income before income taxes
- income tax expense
= net income
Budgeted balance sheet
Budgeted amounts for assets, liabilities, and equity as of the end of the budget period
Prepared using information from other budgets
Fixed budgeting
static budget, based on one predicted amount of sales or other activity measure
Flexible budget
variable budget, based on more that one amount of sales or other activity measure
Standard costs
Preset costs for delivering a product or service under normal conditions
Cost variance
the difference between actual and standard cost
