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ACCA MA: Costing, Budgeting and Variance Formulae

Cards on cost-volume-profit formulae, inventory control, overhead absorption, process costing, budgeting, investment appraisal, standard costing variances and performance measures for ACCA Management Accounting (MA) study. Study material written for practice.

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Contribution per unit
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ACCA Applied Knowledge (BT, MA, FA) mock tests →
1
Contribution per unit
Selling price − variable cost per unit.
2
Break-even point in units
Fixed costs ÷ contribution per unit.
3
Break-even sales revenue
Fixed costs ÷ contribution/sales ratio.
4
Margin of safety
Expected sales − break-even sales; as a percentage: (expected sales − break-even sales) ÷ expected sales.
5
Units for a target profit
(Fixed costs + target profit) ÷ contribution per unit.
6
Limiting factor decision
Rank products by contribution per unit of the scarce resource.
7
High-low method
Variable cost per unit = change in cost ÷ change in activity; fixed cost = total cost − variable cost.
8
Linear regression line
y = a + bx where b is the variable cost per unit and a the fixed cost.
9
Economic order quantity (EOQ)
EOQ = √(2 × cost per order × annual demand ÷ holding cost per unit per year).
10
Reorder level
Maximum usage × maximum lead time.
11
Overhead absorption rate
Budgeted overheads ÷ budgeted activity (such as direct labour hours).
12
Under- and over-absorbed overhead
Overhead absorbed (actual activity × rate) compared with actual overhead: absorbed less than actual = under-absorbed.
13
Absorption versus marginal costing profit difference
Change in inventory units × fixed overhead per unit. Inventory up: absorption profit is higher.
14
Equivalent units
Completed units + (closing work in progress × percentage complete) for each cost element.
15
Process costing: cost per unit with normal loss
(Total cost − scrap value of normal loss) ÷ (input − normal loss).
16
Abnormal loss and abnormal gain
Actual loss > normal loss = abnormal loss; actual loss < normal loss = abnormal gain. Valued at cost per expected unit.
17
Activity-based costing
Cost pool ÷ cost driver volume = rate per driver; charge each product its share of drivers used.
18
Target cost
Target selling price − required profit margin.
19
Prevention, appraisal and failure costs
Prevention and appraisal costs are costs of conformance; internal and external failure are costs of non-conformance.
20
Throughput (throughput accounting)
Sales revenue − totally variable costs (usually direct materials).
21
Throughput accounting ratio
Return per factory hour ÷ cost per factory hour. Above 1, the product covers factory costs.
22
Flexed budget
Variable costs flexed to actual activity; fixed costs unchanged.
23
Production budget units
Sales + closing inventory − opening inventory.
24
Material purchases budget
Production usage + closing inventory − opening inventory.
25
Payback period
Time for cumulative cash inflows to equal the initial investment.
26
Net present value (NPV)
Present value of future cash flows − initial investment. Accept if positive.
27
IRR by interpolation
IRR = A + [NPV_A ÷ (NPV_A − NPV_B)] × (B − A).
28
Accounting rate of return
Average annual profit ÷ average (or initial) investment.
29
Material price variance
(Standard price − actual price) × actual quantity purchased or used.
30
Material usage variance
(Standard quantity for actual output − actual quantity) × standard price.
31
Labour rate and efficiency variances
Rate: (standard rate − actual rate) × hours paid. Efficiency: (standard hours for output − hours worked) × standard rate.
32
Idle time variance
Idle hours × standard rate. Always adverse.
33
Fixed overhead variances (absorption costing)
Expenditure: budget − actual. Volume: (actual output − budgeted output) × standard rate per unit.
34
Sales variances
Price: (actual price − standard price) × actual units. Volume (marginal costing): (actual − budget units) × standard contribution.
35
Return on investment and residual income
ROI = profit ÷ capital employed. RI = profit − (cost of capital × capital employed).
36
Value for money: the three Es
Economy (cost of inputs), efficiency (output per input) and effectiveness (achieving objectives).

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