COST VOLUME PROFIT NATURE, SCOPE, & CONCEPTS ABSORPTION & VARIABLE COSTING

Sales S - VC - FC = NIBT (1-r) = NIAT Raw Materials, beg P>S A>V EI > BI
Purchases P=S A=V EI = BI
Sales (Raw Materials, end) P<S A<V EI < BI
Direct Materials Used
SP US Direct Labor Used Absorption Variable
Factory Overhead
VC & VCR Total Manufacturing Cost Unit cost: [costs/units produced] Unit cost: [costs/units produced]
Work in Process, beg DM DM
VC VCu VC Total Goods Put in Process DL DL
Unit (Work in Process, end) VFOH VFOH
VCu Sales
VCR SP VCR S Cost of Goods Manufactured FFOH UC
Finished Goods, beg UC
CM, CMR, CMu Total Goods Available for Sale
CMu = SP - Vcu (Finished Goods, end) Sales xx Sales xx
CM CM CMu Cost of Goods Sold COGS: VC:
at std [UC x US] xx at std [UVC x US] xx
CMR Sales CMu US CMR SP UF VFOH Variance xx UF VFOH xx
High-Low Method F FFOH Variance (xx) (xx) VSGA xx (xx)
BEPu & BESp Gross Margin xxx Contribution Margin xxx
(single) TC = VC + FC OPEX: FC:
FC FC BESP VSGA xx Actual FFOH* xx
Y2 - Y1 FSGA xx (xx) FSGA xx (xx)
BEPU CMu BESP CMR BEPU SP VC/U =
X2 - X1 NI, Abs Costing xxx NI, Var Costing xxx
* based on highest and lowest level of activity
BEPu & BESp *Actual FFOH = [FOH/u x Normal Capacity] - Favorable FFOH
(multiproduct) FC = Highest or Lowest Activity Cost
FC FC less (Vcu x Highest or Lowest Activity units) To Reconcile:
NI, Abs - NI, Var = FOH/u (P - S)
BEPu WCMu BESp WCMR

MOS & MSR Least square Method

MOS = S - BESp eq. 1 Ʃy = na + bƩx
MOS MOS 1 MOSu = US - BEPu eq. 2 Ʃxy = aƩx + bƩx2
* the abnormal low data should not be included in the data
MSR Sales PR CMR DOL MSR

DOL

CM % change CMR
in profit

DOL PROFIT DOL % change DOL Profit

in Sales ratio

Profit Ratio
P = CM - FC
Profit Profit
P = S x MSR x CMR
ratio
PR Sales MSR CMR

Multiproduct
Product Product Product
A B C
CMu xx xx xx
x SMR % % %
xx xx xx = Wave Cmu

BEPu = FC/WCMu
x
SMRA SMRC
SMRB