Module 2
Deprival value The amount of money that a company would have to receive if it were deprived of the asset
in order to be no worse off than it already is.
The LOWER of :
Replacement cost and the HIGHER of NRV and Revenues expected
High - low method
Variable cost per Variable cost per unit
unit = (Total cost at high activity level - Total cost at low activity level) /(Total units at high
activity level - Total units at low activity level)
Fixed costs Fixed costs
= Total cost - Variable cost
= Total cost at high activity level - (Total units at high activity level x Variable cost per unit)
,Module 3
Prime cost Prime cost
= Total of all direct costs
= Direct materials + Direct labour + Direct expenses
Overheads Overheads
= Indirect material + Indirect labour + Indirec expenses
Total Total manufacturing cost
manufacturing = Prime cost + Manufacturing overheads
cost = Direct materials + Direct labour + Direct expenses + Indirect material + Indirect labour +
Indirec expenses
Absorption costing
Profit Profit (abosorption costing)
= Sales - Variable costs - Fixed costs
Overhead Overhead absorption rate
absorption rate = Estimated overheads/Budgeted activity level
Overhead cost Overhead cost (absorption costing)
= Cost driver x Activity level
= Overhead absorption rate x Activity level
Blanket overhead Blanket overhead absorption rate
absorption rate = Total estimated overheads/Total activity level
Total cost Total cost (absorption costing)
= Variable cost + Fixed cost
Marginal costing
Profit Profit (marginal costing)
= Contribution - Fixed costs
Contribution Contribution
= Sales - Variable cost
Contribution per Contribution per unit
unit = Sales price per unit - Variable cost per unit
Total cost Total cost (marginal costing)
= Variable cost only
= Direct materials + Direct labour + Variable overheads
Closing inventory Closing inventory
= Opening inventory + Production - Sales
Activity - based costing (ABC)
Cost driver rate Cost driver rate
= Total cost in the cost pool/Number of cost drivers
OR
Cost driver rate
= Estimated production overheads relating to cost driver/Estimated total cost driver activity
required
Total cost in the Total cost in the cost pool
cost pool = Cost driver rate x Activity level
, Dealing with losses
Total cost of Total cost of output and losses
output and losses = Cost of output + Normal loss* +/- Abnormal loss/gain
*Normal loss is valued at 0 or disposal value
Cost of output Cost of output
= Actual output units x Cost per unit of output
Cost per unit of Cost per unit of output
output = Costs incurred/Expected output
Costs incurred Costs incurred
= Input cost - Normal loss*
*Normal loss is valued at 0 or disposal value
Input cost Input cost
= Direct materials cost + Direct labour costs + Production overheads
Expected output Expected output
= Input units - Normal loss
OR
Expected output
= Input units - Total loss
Normal loss Normal loss
= % x Input units
Abnormal Abnormal loss/gain
loss/gain = Expected output - Actual output
Abnormal loss Abnormal loss
= Actual loss - Normal loss
= Total loss - Normal loss
Total cost of Total cost for output and losses
output and losses = Cost of output + Scrap value of normal loss +/- Abnormal loss/gain
(scrap value)
Total cost of Total cost of output and WIP
output and WIP = Cost of completed units + Cost of closing inventory +/- Abnormal loss/gains
Cost of completed Cost of completed units
units = Completed units x Cost per completed unit
Completed units Completed units
= Input units - Closing inventory
Cost of closing Cost of closing inventory
inventory = Closing inventory x Cost per completed unit
Cost per Cost per completed unit
completed unit = Total cost of production/Equivalent units of work done
Equivalent units of Equivalent units of work done
work done = Completed units + Closing inventory + Normal loss* +/- Abnormal loss/gain
*Normal loss is valued at 0 or disposal value
Deprival value The amount of money that a company would have to receive if it were deprived of the asset
in order to be no worse off than it already is.
The LOWER of :
Replacement cost and the HIGHER of NRV and Revenues expected
High - low method
Variable cost per Variable cost per unit
unit = (Total cost at high activity level - Total cost at low activity level) /(Total units at high
activity level - Total units at low activity level)
Fixed costs Fixed costs
= Total cost - Variable cost
= Total cost at high activity level - (Total units at high activity level x Variable cost per unit)
,Module 3
Prime cost Prime cost
= Total of all direct costs
= Direct materials + Direct labour + Direct expenses
Overheads Overheads
= Indirect material + Indirect labour + Indirec expenses
Total Total manufacturing cost
manufacturing = Prime cost + Manufacturing overheads
cost = Direct materials + Direct labour + Direct expenses + Indirect material + Indirect labour +
Indirec expenses
Absorption costing
Profit Profit (abosorption costing)
= Sales - Variable costs - Fixed costs
Overhead Overhead absorption rate
absorption rate = Estimated overheads/Budgeted activity level
Overhead cost Overhead cost (absorption costing)
= Cost driver x Activity level
= Overhead absorption rate x Activity level
Blanket overhead Blanket overhead absorption rate
absorption rate = Total estimated overheads/Total activity level
Total cost Total cost (absorption costing)
= Variable cost + Fixed cost
Marginal costing
Profit Profit (marginal costing)
= Contribution - Fixed costs
Contribution Contribution
= Sales - Variable cost
Contribution per Contribution per unit
unit = Sales price per unit - Variable cost per unit
Total cost Total cost (marginal costing)
= Variable cost only
= Direct materials + Direct labour + Variable overheads
Closing inventory Closing inventory
= Opening inventory + Production - Sales
Activity - based costing (ABC)
Cost driver rate Cost driver rate
= Total cost in the cost pool/Number of cost drivers
OR
Cost driver rate
= Estimated production overheads relating to cost driver/Estimated total cost driver activity
required
Total cost in the Total cost in the cost pool
cost pool = Cost driver rate x Activity level
, Dealing with losses
Total cost of Total cost of output and losses
output and losses = Cost of output + Normal loss* +/- Abnormal loss/gain
*Normal loss is valued at 0 or disposal value
Cost of output Cost of output
= Actual output units x Cost per unit of output
Cost per unit of Cost per unit of output
output = Costs incurred/Expected output
Costs incurred Costs incurred
= Input cost - Normal loss*
*Normal loss is valued at 0 or disposal value
Input cost Input cost
= Direct materials cost + Direct labour costs + Production overheads
Expected output Expected output
= Input units - Normal loss
OR
Expected output
= Input units - Total loss
Normal loss Normal loss
= % x Input units
Abnormal Abnormal loss/gain
loss/gain = Expected output - Actual output
Abnormal loss Abnormal loss
= Actual loss - Normal loss
= Total loss - Normal loss
Total cost of Total cost for output and losses
output and losses = Cost of output + Scrap value of normal loss +/- Abnormal loss/gain
(scrap value)
Total cost of Total cost of output and WIP
output and WIP = Cost of completed units + Cost of closing inventory +/- Abnormal loss/gains
Cost of completed Cost of completed units
units = Completed units x Cost per completed unit
Completed units Completed units
= Input units - Closing inventory
Cost of closing Cost of closing inventory
inventory = Closing inventory x Cost per completed unit
Cost per Cost per completed unit
completed unit = Total cost of production/Equivalent units of work done
Equivalent units of Equivalent units of work done
work done = Completed units + Closing inventory + Normal loss* +/- Abnormal loss/gain
*Normal loss is valued at 0 or disposal value
