Formulas (Part 1)
Formulas (Part 1)
Revenue
− Less: cost of goods sold
Absorption
costing Gross margin 2
equation − Less: operating expenses (both fixed and variable)
Net income
Accounting
equation (or
Assets = Liabilities + Owners' equity (or stockholders' equity) 1
balance sheet
equation)
Sales
Asset turnover Asset turnover = 4
Assets
Budgeted sales
Budgeted production
Beginning cash
Net income
Contribution
Contribution margin = Sales revenue – Variable costs 4
margin
Cost of direct
Units of direct materials to be purchased for the period
materials to
be purchased × Cost per unit 3
(purchases at
Cost of direct materials to be purchased for the period (purchases at cost)
cost)
Beginning inventory
+ Purchases
Cost of
Cost of goods available for sale 1
goods sold
− Ending inventory (physical count)
1
Declining balance depreciation expense = 2 × × (Cost – Accumulated depreciation)
Declining n
balance Where: 1
depreciation
N = Useful life
Direct labor
DL efficiency variance = Standard rate × (Actual hours worked – Standard hours allowed)
efficiency 4
= SR × (AH – SH)
variance
Direct labor DL rate variance = Actual hours worked × (Actual rate – Standard rate)
4
rate variance = AH × (AR – SR)
Direct labor DL yield variance = WASRS mix × (The sum of total hours worked –
4
yield variance The sum of total hours allowed)
The sum of
Direct materials
DM mix variance = total quantities × (WASPA mix – WASPS mix) 4
mix variance of materials used
Direct materials DM price variance = Actual quantity purchased × (Actual price – Standard price)
4
price variance = AQpurchased × (AP – SP)
Direct materials DM yield variance = WASPS mix × (The sum of total quantities of materials used – The
4
yield variance sum of total quantities of materials allowed)
Cost
Selling price
Gain/(loss) on sale
Sales price
– Separate costs
Gross profit
– Joint costs 2
margin
Gross profit
Total impairment loss = FV or PV future net cash flows – Net carrying value +
Cost of disposal
Impairment
loss: Assets held *When testing indefinite-life intangible assets for impairment, fair value must be used 1
for disposal instead of undiscounted future net cash flows:
Fair value − Net carrying value = Positive (no impairment) or negative (impairment)
Net realizable
value (for joint Net realizable value = Final selling price − Identifiable costs incurred after split-off 2
costing)
Where:
Or:
Production volume
= FOH application rate × (Actual output – Forecasted output)
variance
Overhead
application Total budgeted overhead costs
Overhead application rate = 2
rate (single Total budgeted cost driver
overhead rate)
Prime costs Prime costs = Direct materials cost + Direct labor costs 2
Beginning Raw
Raw materials Ending inventory of Purchases of
= inventory of + − materials 2
inventory raw materials raw materials
raw materials used
Regression
equation
y = a + b1x1 + b2x2 + bixi 3, 6
(multiple
regression)
y = a + Bx
Where:
Alternative method:
Residual income = Net income (from the income statement) – Required return
Residual income 4
Where:
*Note that this formula is on the ICMA CMA Exam ratio definitions document. There are
multiple ways to calculate many financial ratios. Students should use the ICMA recommended
definitions, when possible, for the CMA exam.
Net income/loss
Retained earnings
Where:
Or:
Return on
investment ROI = Profit margin × Asset turnover
4
(ROI)
Alternative method:
*Note that this formula is on the ICMA CMA Exam ratio definitions document. There are
multiple ways to calculate many financial ratios. Students should use the ICMA recommended
definitions, when possible, for the CMA exam.
Sales price Sales price variance = Actual quantity sold × (Actual price – Standard price)
4
variance = AQsold × (AP – SP)
Sales volume Sales volume variance = Standard price × (Actual quantity – Standard quantity)
4
variance = SP × (AQ – SQ)
Standard quantity of
Standard direct Standard price
Standard DM = × materials allowed for 4
materials per unit
one unit of production
Standard
Standard Standard cost
Standard OH = (predetermined) × 4
overhead application rate
driver per unit
N × (N + 1)
Sum-of-the years' digits =
2
Sum-of-the-
1
years' digits Where:
Total OH Where:
spending
Variable OH Flexible budget variable OH 4
variance (four- = Actual variable OH –
spending variance (based on actual hours used)
way variance)
Total wages
Units-of-production
Rate per unit Number of units produced
(productive output) = ×
Units-of- (or hour) (or hours worked)
depreciation expense
production
(productive Where: 1
output)
depreciation Cost – Salvage value
Rate per unit (or hour) =
Estimated units or hours
Units started
Units started and completed = Units completed − BWIP = Units started − EWIP 2
and completed
Revenue
Variable
(direct) costing − Less: variable costs
equation
Contribution margin 2
(used in the
contribution − Less: fixed costs (includes fixed overhead and fixed operating expenses)
approach)
Net income
Variable
overhead Budgeted variable overhead
Variable overhead application rate = 2
application rate Budgeted variable overhead cost driver
(normal costing)
Weighted
average
(Actual quantity of Material A × Standard price)
standard price + (Actual quantity of Material B × Standard price)
WASPA mix = 4
for the actual
Actual quantity of Material A + Actual quantity of Material B
mix (WASPA
mix)
Weighted
average
(Standard quantity of Material A × Standard price)
standard price + (Standard quantity of Material B × Standard price)
WASPS mix = 4
for the standard
Standard quantity of Material A + Standard quantity of Material B
mix (WASPS
mix)
Weighted
average
(Actual hours of group A × Standard rate)
standard rate + (Actual hours of group B × Standard rate)
WASRA mix = 4
for the actual
Actual hours of group A + Actual hours of group B
mix (WASRA
mix)
Weighted
average
(Standard hours of group A × Standard rate)
standard rate + (Standard hours of group B × Standard rate)
WASRS mix = 4
for the standard
Standard hours of group A + Standard hours of group B
mix (WASRS
mix)