Product Cost Flow
Prime Cost = DM + DL ; Conversion Cost = DL + OH
High Low Method
1) Variable Cost/Unit = Difference in Cost / Difference In Quantity
2) Pick either highest or lowest cost/quantity. (Ex cost, quantity = 2000$ and 40 q)
3) use Y = 2000 - (VC per Unit x 40)
4) Number given is the “a” value. VC/Unit is the “b” value.
5) Sub into y = a + bX.
Fixed Cost = Total Cost - Total Variable Cost
CM per Unit = Unit Price - VC per Unit
CM Ratio = Unit Price - VC per Unit
Break Even Point in Units = Fixed Expenses / CM per Unit
Break-Even Point in Sales = Fixed Expenses / CM Ratio
Margin of Safety = Total Sales - Break Even Sales
POHR = Estimated Total MOH Cost
Estimated total units in allocation