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  Page 1 of 4 Garrison/Libby/Webb  Managerial Accounting 11 th  Edition Formula Summary Chapter 2 1.   Cost of goods sold (merchandising) = Beginning merchandise inventory + Purchases  –   Ending merchandise inventory 2.   Cost of goods sold (manufacturing) = Beginning finished goods inventory + Cost of goods manufactured  –   Ending finished goods inventory Chapter 3 1.   Cost formula: Y = a + bX 2.   Variable cost formula = Change in costChange in activity  3.   Contribution margin = Sales  –   Variable expenses Chapter 4 1.   Profit = (Sales  –   Variable expenses)  –   Fixed expenses 2.   Contribution margin ratio = Contribution marginSales  3.   Variable expense ratio = Variable expensesSales  4.   Break-even in units sold = Fixed expensesUnit contribution margin  5.   Break-even in total sales dollars = Fixed expensesContribution Margin Ratio  6.   Unit sales to attain target profit = Fixed expenses+Target operating profitUnit contribution margin 7.   Dollar sales to attain target profit = Fixed expenses+Target operating profitContribution margin ratio 8.   Profit after taxes = Before-tax profit  –   Taxes 9.   Unit sales to attain target profit after taxes = Fixed expenses+[(Target operating profit)/(1−Tax rate)]Unit contribution margin 10.   Dollar sales to attain target profit after taxes = Fixed expenses+[(Target operating profit)/(1−Tax rate)]Contribution margin ratio  11.   Margin of safety = Total budgeted (or actual) sales  –   Break-even sales 12.   Margin of safety percentage = Margin of safety in dolalrsTotal budgeted (or actual)sales  13.   Degree of operating leverage = Contribution marginOperating income  14.   % change in operating income = Degree of operating leverage x % change in sales 15.   Multi-product break-even in total sales dollars = Fixed expensesOverall Contribution Margin Ratio  16.   Multi-product break-even in unit sales = Fixed expensesWeighted−average contribution margin per unit  17.   Multi-product dollar sales to attain target profit after taxes = Fixed expenses+[(Target operating profit)/(1−Tax rate)Overall contribution margin ratio    Page 2 of 4 Chapter 5 1.   Predetermined overhead rate = Estimated total manufacturing overhead costs Estimated total units in the allocation base 2.   Overhead applied to a particular job = Predetermined overhead rate x Amount of allocation base incurred by job Chapter 6 1.   Unit product cost = Total manufacturing cost (including overhead)/ Total units produced 2.   Equivalent units = Number of partially completed units x percentage completion Weighted average method of process costing: 3.   Equivalent units of production = Units transferred to the next + Equivalent units in ending department or finished goods work in process inventory 4.   Cost per equivalent unit = Cost of beginning WIP + Costs added during the period Equivalent units of production Appendix 6A  FIFO method of process costing: 1.   Equivalent units of production = Equivalent units to complete beginning WIP inventory* + Units started and completed during the period + Equivalent units in ending WIP inventory *Equivalent units to complete beginning WIP inventory = Units in beg. WIP x (100% - % completion of beg. WIP) 2.   Cost per equivalent unit = Costs added during the period Equivalent units of production Chapter 7 1.   Activity rate = Total cost in cost pool / total activity level 2.   Indirect costs applied to cost object = Activity rate x Activity level incurred by cost object Appendix 9A 1.   Economic order quantity = √ 2  2.   Reorder point = Lead time x Average daily or weekly usage  Page 3 of 4 Chapter 10 1.   Total flexible budget variance = Price variance  –   Quantity variance Actual quantity of inputs = AQ Actual Price = AP Standard quantity of inputs = SQ Standard price = SP 2.   Price variance = (AQ x AP)  –   (AQ x SP) a.   Use this formula for Materials price variance, Labour rate variance and Variable overhead spending variance 3.   Quantity variance = (AQ x SP)  –   (SQ x SP) a.   Use this formula for Materials quantity variance, Labour efficiency variance and Variable overhead efficiency variance 4.   Direct materials variances when the amount purchased differs from amount used: a.   Price variance = (AQ x AP)  –   (AQ x SP)  b.   Quantity variance = (AQ x SP)  –   (SQ allowed for actual output x SP) 5.   Predetermined overhead rate = Overhead from flexible budget at denominator level of activity Denominator level of activity 6.   Applied overhead costs in a standard costing system = Standard hours allowed for actual output x Predetermined overhead rate 7.   Total fixed overhead variance = Budget variance + Volume variance 8.   Budget variance = Actual fixed overhead cost  –   Flexible budget fixed overhead csot 9.   Volume variance =Flexible budget fixed overhead cost  –   Fixed overhead cost applied to WIP = Fixed portion of the predetermined overhead rate x (denominator hours  –   standard hours allowed) Appendix 10A M = Actual quantity of inputs at standard mix 1.   Total flexible budget variance = Price variance + Quantity variance = Price variance + [Mix variance + Yield variance] 2.   Price variance = (AQ x AP)  –   (AQ x SP) 3.   Mix variance = (AQ x SP)  –   (M x SP) = (AQ  –   M) SP 4.   Yield variance = (M x SP)  –   (SQ x SP) = (M-SQ)SP Chapter 11 1.   Return on Investment = Operating income / Average operating asset 2.   Return on Investment = Margin x Turnover = Operating Income x Sales Sales Average operating assets 3.   Residual income= Operating income  –   (Average operating assets x min req’d rate of return)    Page 4 of 4 Appendix 12A 1.   Selling price in cost plus pricing = Cost + (Markup percentage x cost) 2.   Markup % on absorption cost = (Required ROI x Investment) + Selling and admin expenses Unit sales x Unit product cost 3.   Markup % on total variable cost = (Required ROI x Investment) + Total fixed expenses Unit sales x Unit total variable costs Chapter 13 1.   Project profitability index = Present value of net cash inflowsInvestment required  2.   Payback period = Investment requiredNet annual cash inflow  3.   Simple rate of return = Incremental operating incomeInitial investment   Appendix 13B 1.   Tax savings from CCA tax shield = Tax rate x CCA deduction 2.   Present value of CCA tax shields = Cdtd+k  x 1+0.5k1+k  3.   Present value of CCA tax shields lost upon disposal = Sdtd+k  x (1 + k) -n  
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