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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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