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 Closing5.Manufacturing Cost= Prime Cost + FOH Cost6.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 + Marketing Expenses)12.12.Applied FOH Rate13.FOH Rate= Total FOH Cost x 100 = Answer %

{Based on Labor Cost}Labor Cost14.FOH Rate= Total FOH Cost x 100 = Answer %

{Based on Material}Material Cost15.FOH Rate= Total FOH Cost x 100 = Answer %

{Based on Prime Cost}Prime Cost16.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 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 Inventory31.Inventory Holding Period= No. of days in year = 365Inventory Turnover Ratio InventoryTurnover Ratio

LaborPremium Bonus Plans32.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-IBonus Rate = Time Saved x 100 = Answer %Time AllowedStep-IIBonus Pay = (Basic Pay) x (Bonus Rate %) = Answer RupeesStep-IIINow Total Pay = Basic Pay + Bonus PayPiece Rate System

Notes to Absorption Costing:

Over/Under Applied FOHBudgeted Production (Budgeted units x Fixed FOH Rate/unit) XXXX(-) Actual Production (Actual units x Fixed FOH Rate/unit) (XXXX)Over/Under Applied FOH XXXXIf Actual Production> Budgeted Production^Over Applied FOHIf 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 Accounting1.Inventory = Stock2.Re-Order Period = Lead Time3.EOQ = Re-Order Quantity4.Standard = Budgeted5.Marginal Costing = Direct Costing6.Absorption Costing = Full Costing = Factory Cost = Production Cost7.Total Production Cost = Manufacturing Cost