# Must Know Formulas for Cost Accounting

Jun 2nd, 2015
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Northwestern State University of Louisiana
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To reduce and eliminate costs in a business, you need to know the formulas that are most often used in cost accounting. When you understand and use these foundation formulas, you’ll be able to analyze a product’s price and increase profits.

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Must Know Formulas for Cost AccountingTo reduce and eliminate costs in a business, you need to know the formulas that are most often used in cost accounting. When you understand and use these foundational formulas, youll be able to analyze a products price and increase profits.BreakevenFormulaProfit (\$0) = sales variable costs fixed costsTarget Net IncomeTarget net income = sales variable costs fixed costsGross MarginGross margin = sale price cost of sales (material and labor)Contribution MarginContribution margin = sales variable costsPre-Tax Dollars Needed for PurchasePre-tax dollars needed for purchase = cost of item (1 - tax rate)Price VariancePrice variance = (actual price - budgeted price) (actual units sold)Efficiency VarianceEfficiency variance = (Actual quantity budgeted quantity) (standard price or rate)Variable O

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