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Cost Accounting Imporatant Formulas

1. Prime cost is the sum of direct material and direct labor costs. Total production cost is prime cost plus fixed overhead costs. Conversion cost is direct labor plus fixed overhead costs. 2. Raw material consumed is calculated as opening raw material plus material purchases minus closing material. Cost of goods manufactured is manufacturing cost (prime cost plus fixed overhead) plus opening work in process minus closing work in process. 3. Goods available for sale is cost of goods manufactured plus opening finished goods. Cost of goods sold is goods available for sale minus closing finished goods.

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3K views

Cost Accounting Imporatant Formulas

1. Prime cost is the sum of direct material and direct labor costs. Total production cost is prime cost plus fixed overhead costs. Conversion cost is direct labor plus fixed overhead costs. 2. Raw material consumed is calculated as opening raw material plus material purchases minus closing material. Cost of goods manufactured is manufacturing cost (prime cost plus fixed overhead) plus opening work in process minus closing work in process. 3. Goods available for sale is cost of goods manufactured plus opening finished goods. Cost of goods sold is goods available for sale minus closing finished goods.

Uploaded by

santhimba
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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COST ACCOUNTING FORMULAS & IMPORTANT TERMINOLOGIES

1. Prime Cost = Direct Material + Direct Labor


2. Total Production Cost = Prime Cost + FOH Cost
3. Conversion Cost = Direct Labor + FOH Cost
4. Raw Material Consumed= Raw Material Opening + Material Purchases– Material
Closing
5. Manufacturing Cost = Prime Cost + FOH Cost {Same as Sr. No.2}
6. Cost Of Goods Manufactured= Manufacturing Cost + Opening WIP– Closing
WIP
7. Goods Available for Sale= Cost Of Goods Manufactured + Opening Finished Goods
8. Cost of Goods Sold = Goods Available for Sale– Closing Finished Goods
9. Contribution Margin = Sales– Variable Cost
10. Income Statement = Gross Profit– Operating Expenses
11. Income Statement = (Sale-COGS) – (Selling + Admin + Marketing Expenses)
12. Applied FOH Rate
13. FOH Rate = Total FOH Cost x 100 = Answer %{ Based on Labor Cost} Labor Cost
14. FOH Rate = Total FOH Cost x 100 = Answer %{ Based on Material} Material Cost
15. FOH Rate = Total FOH Cost x 100 = Answer %{ Based on Prime Cost} Prime Cost
16. FOH Rate = Budgeted FOH Cost = Answer Rupees {Based on Labor Hours}
17. FOH Rate = Budgeted FOH Cost = Ans Rupees {Based on Machine Hours}
18. Per Unit Cost = Cost of Goods Manufactured No. of Units Produced
19. Re-Order Period = Lead Time
20. EOQ = Re-Order Quantity
21. Re-Order Level = (Max Consumption) x (Max Lead Time)
22. Max Stock Level= Re-Order Level– (Min Consumption) x (Min Lead Time) + EOQ
23. Min Stock Level = Re-Order Level– (Avg Consumption) x (Avg Lead Time)
24. Danger Stock Level = (Avg Consumption) x (Emergency Lead Time)
25. Average Stock Level = Min Stock Level + Max Stock Level
26. Average Stock Level = Min Stock Level + Re-Order Quantity
27. Average Stock Level = Min Stock Level + EOQ
28. EOQ= (Annual Units Consumption) x (Cost per Order)
(Cost per unit of Material) x (Carrying Cost Percentage)
29. Safety Stock = (Annual Demand) x (Max Lead Time– Min Lead Time)
365 x (Avg Lead Time)
30. Inventory Turnover Ratio = Material Consumed = Answer Times
Avg Inventory
31. Inventory Holding Period = No. of days in year = 365
Marginal Costing / Direct Costing
Sales
XXXX
Less Variable Cost of Goods Sold
Opening Stock(Opening Stock x Variable FOH Rate/unit)
XXXX
+ Production(Produced Units x Variable FOH Rate/unit)
XXXX
(-) Closing Stock(Closing x Variable FOH Rate/unit)
(XXXX)
Variable COSTS
XXXX
(XXXX)
Gross Contribution Margin
XXXX
(Less) Variable Marketing Expenses (if any)
(XXXX)
Net Contribution Margin
XXXX
Less Fixed Costs (if any)
Period Cost (Sales x Fixed FOH Rate)
XXXX
+ Fixed Marketing Expenses
XXXX
Total Fixed Costs
XXXX
(XXXX)
Net Profit by Marginal Costing
XXXX
Notes to Marginal Costing:-
a. Fixed Cost are for one month only then they will be treated as Period Cost.
b. Inventory is multiplied to only Variable FOH Rate per unit.
c. Marginal Costing shows higher profits.

d.
Marginal Costing leads to Contribution Margin (CM) then Net Profit.
33.
Absorption Costing
Sales
XXXX
Less Cost of Goods Sold
Opening Stock
XXXX
{Opening Stock x (Fixed FOH Rate/unit +Variable FOH Rate/unit)}
+ Production
XXXX
{Units Produced x (Fixed FOH Rate/unit +Variable FOH Rate/unit)}
(-) Closing Stock
(XXXX)
{Closing Stock x (Fixed FOH Rate/unit +Variable FOH Rate/unit)}
Cost of Goods Sold
XXXX
+Under / (-)Over Applied FOH
XXXX
Cost of Goods Sold at Actual
XXXX
(XXXX)
Gross Profit
XXXX
Less Marketing Expenses (if any)
Fixed Marketing Expenses
XXXX
+ Variable Marketing Expenses
XXXX
Total Marketing Expenses
XXXX
(XXXX)
Net Profit by Absorption Costing
XXXX
Notes to Absorption Costing:-
e.
Over/Under Applied FOH
Budgeted Production (Budgeted units x Fixed FOH Rate/unit)XXXX
(-) Actual Production (Actual units x Fixed FOH Rate/unit)
(XXXX)
Over/Under Applied FOH
XXXX
 If Actual Production> Budgeted Production^ Over Applied FOH
 If Actual Production< Budgeted Production^ Under Applied FOH
f.
If Over– Applied FOH ^ Minus from COGS at Actual
g.
If Under– Applied FOH ^ Add in COGS at Actual
h.
Absorption Costing leads to Gross Profit (GP) then Net Profit.
Confusing Terminologies of Cost Accounting
1. Inventory = Stock
2. Re-Order Period = Lead Time
3. EOQ = Re-Order Quantity
4. Standard = Budgeted
5. Marginal Costing = Direct Costing
6. Absorption Costing = Full Costing = Factory Cost = Production Cost
7. Total Production Cost = Manufacturing Cost

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