Create a Two Page Study Guide with this Information

Chap. $1$

Direct vs$.$ indirect costs

Manufacturing costs $($DM$,$ DL and MOH$)$

Prime and conversion cost

Nonmanufacturing costs $($selling and administrative costs$)$

Product vs$.$ period costs

Variable vs$.$ fixed costs vs$.$ mixed costs $($in total and per unit$)$

Relevant vs$.$ irrelevant costs

Differential cost and revenue, sunk cost, opportunity cost

Contribution income statement

Chap. $2$

Job$-$order costing system record and its components

Source documents: material requisition form, time sheet$/$card

Predetermined OH rate $=$ Budgeted OH$/$ Budgeted allocation base

Applied OH $=$ Predetermined OH rate x Actual allocation base

Plantwide vs$.$ Departmental OH rates

Chap. $3$

The transactions $($in T$-$account and journal entry form$)$ that capture the flow of costs in a job$-$order costing system

Cost flow from Raw Material to Work in Process to Finished Goods $($including disposal of OH variance$)$

Schedule of COGM, COGS and income statement

Under or overapplied OH: comparison between actual and applied overhead

To dispose under$/$overapplied OH: write off to COGS

Disposal of overapplied $($underapplied$)$ OH will decrease $($increase$)$ COGS

Chap. $5$

CVP analysis, CM$,$ unit CM$,$ CM ratio

CVP graph, sensitivity analysis $($the effect on net operating income of changes in variable costs, fixed costs, selling price, and sales volume$)$

Target profit analysis and break$-$even analysis

Margin of safety $($in units, in revenue, and as a $\%)$

Operating leverage

$\%$change in profits$/$net operating income $=$ degree of operating leverage x

$\%$change in sales

Multiple$-$product break$-$even

Sales mix in revenue

Chap$7$: Activity$-$based Costing

Traditional costing with volume drivers: may overcost some products while undercost others

Activity hierarchy: unit$-$level, batch$-$level, product$-$level, customer$-$level and Organization$-$sustaining level

First stage allocation: Identify activity pools and allocation OH $($indirect cost$)$ to each pool

Second stage allocation: For each pool, identify activity measure $/$ driver$/$ allocation base, calculate activity pool rate, and allocate cost to product lines, customers and customer orders

Product $($line$)$ margin report

Customer profitability$/$margin report

Differences between ABC and traditional costing