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ACCTG 231: EXAM 2
Unit-level activities
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Are performed each time a unit is produced
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Batch-level activities
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Consist of tasks that are performed each time a batch is processed, such as processing purchase orders, setting up equipment, packing shipments to customers, and handling material
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Product-level activities
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Relate to specific products and typically must be carried out regardless of how many batches or units of the product are manufactured
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Facility-level activities
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Are activities that are carried out regardless of which products are produced, how many batches are run, or how many units are made
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Equivalent units equation
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Equivalent units= Number of partially completed units x percentage completion
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Weighted-average equivalent units equation
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Equivalent units of production= Units transferred to the next department or to finished goods + Equivalent units in ending work in process inventory
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Conversion cost equation
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Direct labor cost + manufacturing overhead cost
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Cost per equivalent unit- weighted-average equation
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Cost per equivalent unit= Cost of beginning work in process inventory + Cost added during the period/ Equivalent units of production
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CVP relationship equation
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Profit= (Sales – Variable expenses) – Fixed Expenses
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CM ratio equation
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CM ratio= Contribution margin/Sales
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Change in CM equation
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Change in contribution margin= CM ratio x Change in sales
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Profit with CM ratio equation
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Profit= CM ratio x Sales – Fixed Expenses
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Variable expense ratio equation
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Variable expense ratio= Variable expenses/Sales
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Target profit unit analysis equation
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Unit sales to attain the target profit= Target profit + Fixed expenses/Unit CM
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Target profit dollar equation
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Dollar sales to attain a target profit= Target profit + Fixed expenses/CM ratio
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Break-even unit analysis equation
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Unit sales to break even= Fixed expenses/Unit CM
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Break-even dollar equation
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Dollar sales to break even= Fixed expenses/CM ratio
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Margin of safety in dollars equation
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Margin of safety in dollars= Total budgeted (or actual) sales – Break-even sales
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Margin of safety % equation
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Margin of safety percentage= Margin of safety in dollars/Total budgeted (or actual) sales in dollars
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Operating leverage degree
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Degree of operating sales= Contribution margin/Net operating income
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Percentage change in operating income equation
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Percentage change in net operating income= Degree of operating leverage x Percentage change in sales
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