Summary CPA Strategic Management Accounting formula notes
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Course
CPA Australia
Institution
CPA Australia
Formula summary for CPA Strategic Mgmt Accounting. The summary includes page number and in-depth explanation of the formula as well as how to apply it in exam
3 ways to calculate
Account payable cycle (eveluate efficiency) * payable turnover = cost of sales / average payable
* payable days = 365/ payable turnover
* payable days = average payable / cost of sales x 365
3 ways to calculate
Account receivable cycle (eveluate efficiency) * sales / average receivable = receivable turnover
* receivable days = 365/ receivable turnover
* receivable days = average receivables / sales x 365 30 - 60 days is healthy. But > 90 days is very poor
Actual Result p 123 AQ x AP
Break even point in dollars (BP$) fixed cost / CMR = $ the point where revenue equal cost
Break even point in units (BPU) fixed cost / CMU = units the point where revenue equal cost
Business process management BPM p345 activity cost: input
Cash cycle operating cycle - payable days
CI (unists per $ of input) = units of product (quantity) / activity cost ($) * input focus: reduce wage of machine operators, have 1 operators supervise more than 1 machine
units of product: output * output focus: add a second shift to produce more products --> will increase cost but net effect is what matter
continuous improvement CI p351 to improve the activity, ratio needs to increase * driver focus: reduce machine hour by running machine at faster speed
Contribution margin (CM) * this measure the amunt of revenue left over after subtract variable cost associated with producing a product
Total revenue - total variable cost = $ * if it's high, it means company bring in more money that it spends
Contribution margin per unit (CMU) sales price per unit - variable cost per unit = $ per unit
Contribution margin ratio (CMR) CMU / Sales price per input = % what % of sales income will be available to cover fixed expense
Cost of goods sold the starting inventory + purchases – ending inventory
step 1: cost of manufacturing = cost of direct materials + cost of direct labour + manufacturing overhad cost
Step 2: cost of goods available for sale = opening finished goods inventory + cost of manufacturing (answer from step 1) -
Cost of goods sold budget p113 ending finished goods inventory = budgeted COGS original COGS formula = beginning inventory + purchases during the period – ending inventory. This is from the production budget
Cost performance index p195 Earn value /Actual Cost
Cost variance for project p195 example 4.17 Earned Value - Actual Cost if negative it means over budget --> need reassessment of budgeted cost of project
Crash (cost-time slope of an acitivity) p191 (crash cost - normal cost) / (normal duration - crash duration) the critical activity with lowest cost-time slope will the first to crash
Critical path p189
current asset / current liability
Current ratio a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year healthy is 2:1. Unhealthy is usually < 1:1
net margin earned = net price - cost of goods supplied - other customer related cost
*net price = gross selling price - sales discounts - other allowances
Step 1: calculate the gross margin using the normal formula
Step 2: determine the pool rate for the cost pool
Step 3: calculate the customer service cost (indirect cost) = pool rate above x number of cost drivers
customer profit analysis p370 Step 4: calculate net margin (customer profitability) = gross margin - indirect cost in step 3 net margin is more accurate compared to gross margin
Debt to asset hows how much of a business is owned by creditors (people it has borrowed money from) compared with how much of the > 60% indicate a worrying level of debt
* (actual quantity- flexible budget quantity) x budget price
Direct labour efficiency variance * use this to evaluate production managers
(AQ x BP) - ( (BQ labour hour per unit x AQ units produced) x BP ) * It is unfavourable when use lower quality material --> more time to work and rework
(AQ x AP) - ( (BQ labour hour per unit x AQ units produced) x BP )
Direct labour flexible budget variance = efficiency + price OR
variance step 1: (AQ x AP) - (AQ x BP).
Step 2: (AQ x BP) - ( (BQ labour hour per unit x AQ units produced) x BP ).
Step 3: Total step 1 and 2
* (actual price - budget price) x actual quantity
Direct labour price variance * use this to evaluate production managers
(AQ x AP) - (AQ x BP) * It is unfavourable when use lower quality material --> more time to work and rework --> labour cost increase
* ALWAYS USE PRODUCTION BUDGET. DO NOT RELU ON SALES THAT DE BAI CHO. BECAUSE WE NEED TO PRODUCE EXTRA
Direct manufacturing labour cost budget p113 FOR NEXT MONTH
Production requirement (unit) (from above) x direct labour hours per unit (hr) x direct labour cost per hour ($) = total direct* production manager will prepare this
* (actual quantity - flexible budget quantity) x budgeted price
Direct material efficiency variance * use this to evaluate production manager
(AQ x BP) - ( (BQ of raw material per unit x AQ units produced) x BP ) * It is unfavourable when use lower quality material --> more materials being used and wasted
(AQ x AP) - ( (BQ of raw material per unit x AQ units produced) x BP )
Direct material flexible budget variance = efficiency + price OR
variance step 1: (AQ x AP) - (AQ x BP).
Step 2: (AQ x BP) - ( (BQ labour hour per unit x AQ units produced) x BP ).
Step 3: Total step 1 and 2
Direct material price variance * (actual price - budget price) x actual quantity
(AQ x AP) - (AQ x BP) * use this to evaluate purchasing manager
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