WGU D774 Intro to Business Accounting
Questions and Answers | 2026 Simplified
Cheat Sheet | A+ Verified
• Accounting Equation (balance sheet) -✓✓Assets = Liabilities + Owner's Equity
• Net Income Formula -✓✓Revenues - Expenses = Net Income
This formula is used inside the income statement
• Gross Margin -✓✓Gross Margin = Revenue − Cost of Goods Sold (COGS)
Profit after subtracting Cost of Goods Sold from Revenue
• Contribution Margin -✓✓Sales - Variable Costs
The amount remaining from sales revenue after variable costs are deducted; used to
cover fixed costs and contribute to profit.
• Break-even point -✓✓fixed cost/ contribution margin
(/=divide by)
The level of sales at which total revenue equals total costs, resulting in neither profit nor
loss.
• COGS formula -✓✓beginning inventory + purchases - ending inventory
• Prime Costs -✓✓Direct Materials + Direct Labor
The total of direct materials and direct labor in production.
• Net Income (or Net Loss) -✓✓The amount of profit or loss remaining after all
revenues, expenses, gains, and losses have been accounted for.
• Conversion Costs -✓✓Direct Labor + Manufacturing Overhead
The sum of direct labor and manufacturing overhead; costs involved in converting
materials to finished goods.
• Equity -✓✓Assets-liabilities= Equity
, Owners share in the business
• indirect labor costs -✓✓Cost of workers who support production but do NOT directly
make the product, supports the people who touch the product
Examples:
Factory supervisors
Maintenance workers
Quality inspectors
Cleaning staff in the factory
• Mixed cost -✓✓A cost that contains both variable and fixed cost elements.
Ex:
utility bill ( they charge a fee for the water, and then they charge you for how much
water you used)
(20 cents * a month)
• Manufacturing Overhead -✓✓Indirect costs required for production
Ex: Utilities, rent, equipment depreciation
• Direct Materials -✓✓Raw materials used to make a product
Ex: flour, sugar, eggs to make the bread
• Direct Labor -✓✓Wages paid to workers directly making the product
• Fixed Cost -✓✓a cost that does not change, no matter how much of a good is
produced
example:
Rent is 2000 a month, and it will be the same next month
• Variable Costs -✓✓costs that vary directly with the level of production
Ex:
Materials: more production, the more materials you need
• Product Cost -✓✓Includes direct material, direct labor, and manufacturing overhead
• Period Cost -✓✓Not directly related to production but necessary for business
operations.
Recorded as expenses on the income statement in the period they occur.
Includes selling, administrative, and non-manufacturing costs.
Questions and Answers | 2026 Simplified
Cheat Sheet | A+ Verified
• Accounting Equation (balance sheet) -✓✓Assets = Liabilities + Owner's Equity
• Net Income Formula -✓✓Revenues - Expenses = Net Income
This formula is used inside the income statement
• Gross Margin -✓✓Gross Margin = Revenue − Cost of Goods Sold (COGS)
Profit after subtracting Cost of Goods Sold from Revenue
• Contribution Margin -✓✓Sales - Variable Costs
The amount remaining from sales revenue after variable costs are deducted; used to
cover fixed costs and contribute to profit.
• Break-even point -✓✓fixed cost/ contribution margin
(/=divide by)
The level of sales at which total revenue equals total costs, resulting in neither profit nor
loss.
• COGS formula -✓✓beginning inventory + purchases - ending inventory
• Prime Costs -✓✓Direct Materials + Direct Labor
The total of direct materials and direct labor in production.
• Net Income (or Net Loss) -✓✓The amount of profit or loss remaining after all
revenues, expenses, gains, and losses have been accounted for.
• Conversion Costs -✓✓Direct Labor + Manufacturing Overhead
The sum of direct labor and manufacturing overhead; costs involved in converting
materials to finished goods.
• Equity -✓✓Assets-liabilities= Equity
, Owners share in the business
• indirect labor costs -✓✓Cost of workers who support production but do NOT directly
make the product, supports the people who touch the product
Examples:
Factory supervisors
Maintenance workers
Quality inspectors
Cleaning staff in the factory
• Mixed cost -✓✓A cost that contains both variable and fixed cost elements.
Ex:
utility bill ( they charge a fee for the water, and then they charge you for how much
water you used)
(20 cents * a month)
• Manufacturing Overhead -✓✓Indirect costs required for production
Ex: Utilities, rent, equipment depreciation
• Direct Materials -✓✓Raw materials used to make a product
Ex: flour, sugar, eggs to make the bread
• Direct Labor -✓✓Wages paid to workers directly making the product
• Fixed Cost -✓✓a cost that does not change, no matter how much of a good is
produced
example:
Rent is 2000 a month, and it will be the same next month
• Variable Costs -✓✓costs that vary directly with the level of production
Ex:
Materials: more production, the more materials you need
• Product Cost -✓✓Includes direct material, direct labor, and manufacturing overhead
• Period Cost -✓✓Not directly related to production but necessary for business
operations.
Recorded as expenses on the income statement in the period they occur.
Includes selling, administrative, and non-manufacturing costs.
