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Helpful Formulas Chapters One through Three
Accounting 2020
Generic Formula for Calculating Amounts Transferred from Department to Department
Beginning inventory + transferred in – ending inventory = transferred out
Formula for Calculating the Total of Raw Materials Used in Factory and Overhead
Beginning inventory raw materials + purchases – ending inventory raw materials = total of raw materials used in factory and overhead
Formula for Calculating Cost of Goods Manufactured
Beginning inventory work in process + (direct materials + direct labor + overhead applied) – ending inventory work in process = cost of goods manufactured
Formula for Calculating Production Cost
Direct labor + Direct Materials + Factory Overhead = Production Cost
Formula for Calculating Cost of Goods Sold
Beginning inventory finished goods + cost of goods manufactured – ending inventory finished goods = cost of goods sold (before overhead adjustment)
Formula for Calculation Predetermined Overhead Rate
[pic] = Predetermined overhead rate
Note: Base can be many things including direct labor hours, direct labor dollars, machine hours, and units manufactured
Formula for Calculating Overhead Applied
Predetermined overhead rate x actual base = overhead applied
Formula for Calculating Breakeven in Dollars—Formula Method
[pic] = Breakeven in dollars
Formula for Calculating Contribution Margin Ratio
[pic] = Contribution Margin Ratio
or
[pic] = Contribution Margin Ratio
1 – variable expense ratio = contribution margin ratio
Formula for Calculating Breakeven in Units of Production—Formula Method
[pic] = Breakeven in Units
Formula for Calculating Variable Expense Ratio
[pic] = Variable Expense Ratio
or
1 – Contribution Margin Ratio = Variable Expense Ratio
Formula for Calculating Breakeven in Dollars—Equation Method
PX – VX – F = 0
Where:
P = price per unit
V= variable cost per unit
F = total fixed cost
X = units of production
Formula for Calculating Target Sales in Dollars—Formula Method
[pic] = Target cost sales in dollars
Formula for Calculating Target Sales in Units—Formula Method
[pic] = Target sales in units
Formula for Calculating Target Sales in Units—Equation Method
PX – VX – F = [pic]
Where:
P = price per unit
V= variable cost per unit
F = total fixed cost
X = units of production
[pic] = target profit
Formula for Calculating Margin of Safety
Present sales – breakeven sales = margin of safety
Note: This can be calculated in dollars or units
Formula for Calculating Margin of Safety Ratio
[pic] = Margin of Safety Ratio
Formula for Calculating Degree of Operating Leverage
[pic] = Degree of Operating Leverage
Formula for Calculating the Percent Change in Profit Given a Percent Change in Sales
Operating leverage ratio x percent increase in sales = percent increase in profits
Formula for Calculating How Much Income Will Change in Dollars Given a Given Dollar Change in Sales
Contribution margin ratio x dollar increase in sales = dollar increase in profit
Formula for Separating Fixed and Variable Costs Using High-Low Method
[pic] = slope which is the variable cost per unit
Where
High Y = Highest total cost
Low Y = Lowest total cost
High X = highest units of production
Low X = lowest units of production
Now to get fixed costs use this formula:
Total cost (at high or low) – total variable costs (at high or low—just be consistent) = Total fixed costs
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