Cost Accounting Formulas And Terminologies

Cost Accounting Formulas And Terminologies

1.Prime Cost= Direct Material + Direct Labor2.

2.Total Production Cost= Prime Cost + FOH Cost3.

3.Conversion Cost= Direct Labor + FOH Cost4.

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 – ClosingWIP7.

7.Goods Available for Sale= Cost Of Goods Manufactured + Opening Finished Goods8.

8.Cost of Goods Sold= Goods Available for Sale – Closing Finished Goods9.

9.Contribution Margin= Sales – Variable Cost10.

10.Income Statement= Gross Profit – Operating Expenses11.

11.Income Statement= (Sale-COGS) – (Selling + Admin + MarketingExpenses)12.

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 ManufacturedNo. of Units Produced19.

19.Re-Order Period= Lead Time20.

20.EOQ= Re-Order Quantity21.

21.Re-Order Level= (Max Consumption) x (Max Lead Time)22.

22.Max Stock Level= Re-Order Level – (Min Consumption) x (Min Lead Time) + EOQ23.

23.Min Stock Level= Re-Order Level – (Avg Consumption) x (Avg LeadTime)24.

24.Danger Stock Level= (Avg Consumption) x (Emergency Lead Time)25.

25.Average Stock Level= Min Stock Level + Max Stock Level226.

26.Average Stock Level= Min Stock Level + Re-Order Quantity227.

27.Average Stock Level= Min Stock Level + EOQ228.

28.EOQ= 2 (Annual Units Consumption) x (Cost per Order)(Cost per unit of Material) x (Carrying Cost Percentage)29.

29.Safety Stock= (Annual Demand) x (Max Lead Time – Min Lead Time)365 x (Avg Lead Time)30.

30.Inventory Turnover Ratio= Material Consumed = Answer TimesAvg Inventory

31.Inventory Holding Period= No. of days in year = 365Inventory Turnover Ratio InventoryTurnover Ratio

Labor

Premium Bonus Plans
32.Halsey Bonus Plan= (Time Allowed – Time Saved) x (Rate per Labor Hour)233.

33.Halsey-Weir Premium Bonus Plan= (Time Allowed – Time Saved) x (Rate per Labor Hour)334.

34.Rowan Premium Plan
Step-I
Bonus Rate = Time Saved x 100 = Answer %Time Allowed
Step-II
Bonus Pay = (Basic Pay) x (Bonus Rate %) = Answer Rupees
Step-III
Now Total Pay = Basic Pay + Bonus Pay
Piece Rate System

Notes to Absorption Costing:

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 FOHf.
If Over – Applied FOH ^ Minus from COGS at Actualg.
If Under – Applied FOH ^ Add in COGS at Actualh.
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