Managerial Accounting Formulas: Variance, CVP, ROI & Decisions
Direct Materials and Labor Variances
Direct Materials and Labor:
Materials Price Variance = (AP – SP) x AQ
Materials Quantity Variance = (AQ – SQ) x SP
Materials Spending Variance = MPV + MQV
Labor Rate Variance = (AR – SR) x AH
Labor Efficiency Variance = (AH – SH) x SR
Labor Spending Variance = LRV + LEV
Standard Hours and Standard Cost
Standard Hours and Cost:
Standard Hours Allowed = standard hours per unit x actual output
Standard cost allowed = SQ x SP or SH x SR
Variable and Fixed Overhead Variances
Variable
Principles of Flight
A Trial Balance is a financial report that lists the names and balances of all the accounts in the general ledger of a business at a specific point in time. Its primary purpose is to verify the mathematical accuracy of the double-entry bookkeeping system by ensuring that the total of all the Debit balances equals the total of all the Credit balances.
📝 Errors Revealed by the Trial Balance -Errors that cause the total of the debit column to be unequal to the total of the credit column are revealed
Manufacturing Income Statement: COGS and COGM Calculation
Manufacturing Income Statement Complexity
The Income Statement for a manufacturing company is the most complex of all business types because it must accurately track and allocate the costs of converting raw materials into finished goods.
The core complexity lies in the calculation of the Cost of Goods Sold (COGS), which requires the use of several schedules to move costs through three different inventory accounts: Raw Materials, Work-in-Process (WIP), and Finished Goods.
Key Distinguishing Feature:
Read MoreFundamental Accounting Principles and Rules
Accounting Concepts and Conventions – 20
Accounting is called the language of business. To ensure that financial statements are prepared in a meaningful and uniform manner, accountants follow certain basic rules, assumptions, and principles. These are known as Accounting Concepts and Conventions. They provide a framework within which accounts are prepared so that they become reliable, comparable, and understandable for users.
Part I: Accounting Concepts
Accounting concepts are basic assumptions on
Read MoreGerman Tax Law Fundamentals: PE, Income Methods, and Key Definitions
Permanent Establishment (PE) under German Law (Section 12 General Fiscal Code)
Permanent establishment shall mean any fixed place of business or facility serving the business of an enterprise. In particular, the following shall be considered permanent establishments:
- The place of business management;
- Branches;
- Offices;
- Factories or workshops;
- Warehouses;
- Purchasing offices or sales outlets;
- Mines, quarries, or other stationary, moving, or floating facilities for the exploitation of natural resources;
- Building
Key Financial Concepts for Smart Investment Decisions
Choosing Loans Based on Effective Annual Rate (EAR)
When selecting a loan, it is advisable to choose the option with a lower Effective Annual Rate (EAR), as this represents the true annual cost of borrowing after accounting for compounding interest.
Why Nominal Interest Rate Can Be Misleading
It’s crucial to understand that the lowest nominal interest rate does not always equate to the lowest overall cost. A comprehensive comparison requires evaluating the effective rate, which considers compounding.
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