🧾 CA Inter Costing – Essential Formulas & Concept

📘 1. Material Costing

• Material Cost = Purchase Price + Freight + Taxes – Discounts + Other Expenses
• EOQ (Economic Order Quantity) EOQ=2ABCSEOQ = \sqrt{\frac{2AB}{CS}}EOQ=CS2AB​​ Where:
  • A = Annual consumption
  • B = Ordering cost per order
  • C = Cost per unit
  • S = Storage & carrying cost %
• Stock Levels:
  • Reorder Level = Maximum usage × Maximum lead time
  • Minimum Level = Reorder Level – (Normal usage × Normal lead time)
  • Maximum Level = Reorder Level + Reorder Quantity – (Minimum usage × Minimum lead time)
  • Average Stock Level = Minimum Level + ½ Reorder Quantity

📙 2. Labour Costing

• Time Wage System = Hours Worked × Rate per Hour
• Piece Rate System = Units Produced × Rate per Unit
• Incentive Schemes:
  • Halsey Plan = Time Taken × Rate + 50% of Time Saved × Rate
  • Rowan Plan = Time Taken × Rate + (Time Saved / Time Allowed) × Time Taken × Rate
• Labour Turnover: Labour Turnover Rate=(Number of Employees Left or ReplacedAverage No. of Employees)×100\text{Labour Turnover Rate} = \left( \frac{\text{Number of Employees Left or Replaced}}{\text{Average No. of Employees}} \right) \times 100Labour Turnover Rate=(Average No. of EmployeesNumber of Employees Left or Replaced​)×100

📗 3. Overheads

• Overhead Rate = Overheads / Base Units (Labour hours, Machine hours, etc.)
• Machine Hour Rate = (Total Machine-Related Overheads) / Machine Hours
• Absorption Rate Methods:
  • Labour Hour Rate
  • Machine Hour Rate
  • % of Direct Material Cost / Direct Labour Cost / Prime Cost
• Under/Over Absorption = Actual Overheads – Absorbed Overheads

📕 4. Cost Sheet

• Prime Cost = Direct Material + Direct Labour + Direct Expenses
• Factory Cost = Prime Cost + Factory Overheads
• Cost of Production = Factory Cost + Admin Overheads (related to production)
• Total Cost / Cost of Sales = Cost of Production + Selling & Distribution Overheads
• Profit = Sales – Total Cost

📒 5. Contract Costing

• Notional Profit = Value of Work Certified – (Cost of Work to Date)
• Profit to be Recognized:
  • <25% Completion: No profit
  • 25%-90%: Profit to be transferred=Notional Profit×Cash ReceivedWork Certified×23\text{Profit to be transferred} = \text{Notional Profit} \times \frac{\text{Cash Received}}{\text{Work Certified}} \times \frac{2}{3}Profit to be transferred=Notional Profit×Work CertifiedCash Received​×32​
  • 90% Completion: Estimate Total Profit × Work Certified / Contract Price × Cash Received / Work Certified

📔 6. Process Costing

• Cost per unit = Total Cost / Equivalent Units
• Abnormal Loss / Gain = Normal Cost per Unit × Abnormal Units
• Equivalent Units = Units × % of Completion (for materials, labour, overhead)

📓 7. Marginal Costing

• Contribution = Sales – Variable Cost
• P/V Ratio = (Contribution / Sales) × 100
• Break-Even Point (BEP):
  • In Units: Fixed Cost / Contribution per unit
  • In Sales: Fixed Cost / P/V Ratio
• Margin of Safety (MOS) = Actual Sales – BEP Sales
• Profit = (Sales – BEP Sales) × P/V Ratio

📘 8. Standard Costing

• Material Cost Variance (MCV) = (Standard Price × Std Qty) – (Actual Price × Actual Qty)
• Labour Cost Variance (LCV) = (Standard Rate × Std Hrs) – (Actual Rate × Actual Hrs)
• Similar format applies for Usage, Rate, Efficiency, etc.

📙 9. Budgetary Control

• Flexible Budget: Budget prepared for different levels of activity
• Fixed Budget: Budget remains unchanged for a specific level

🧠 Tips to Remember:

• Focus on understanding the logic behind the formulas.
• Practice past questions to solidify concepts.
• Use a summary chart or flashcards for formulas.