B2: Forecast & Projection

Question 1

Contribution Margin ratio formula

Answer 1

Contribution margin / Revenue

Question 2

contribution approach vs. absorption approach

Answer 2

the difference is the treatment of fixed factory overhead

Question 3

Formula for Gross profit margin

Answer 3

GM(or GP)/ Net sales

Question 4

Break even point in units formula

Answer 4

total FC/CM per unit

Question 5

Break even point in sales dollar ( 3 ways)

Answer 5

1) unit price X BE in UI
2) total FC/ CM ratio
3) BE UI * SP per unit

Question 6

formula for CM per unit

Answer 6

SP per UI - VC per UI

Question 7

Formula for CM ratio

Answer 7

cm/sales

Question 8

Define Margin of safety

Answer 8

excess of sales lover Break even sales

Question 9

Compute Margin of safety in sales dollars

Answer 9

total sales- breakeven sales=MOS

Question 10

Margin of safety formula as a %

Answer 10

MOS in $$/total sales

Question 11

Another name for operational analysis

Answer 11

marginal analysis

Question 12

When is marginal analysis used?

Answer 12

introduction of new product or changes in output levels, acceptance/rejection of special orders, making or buying product service, adding/dropping segment

Question 13

Name the 4 types of Relevant cost

Answer 13

1. incremental
2. opportunity cost
3. controllable cost
4. Marginal cost

Question 14

Name the 2 types of not relevant cost

Answer 14

1. Sunk costs

2. uncontrollable cost

Question 15

Define sunk cost

Answer 15

unavoidable cost because they happen in the past

Question 16

define incremental cost

Answer 16

additional cost incurred to produce an additional amount of unit over present output

Question 17

Define marginal cost

Answer 17

sum of cost required for a one-unit increase in activity

includes all VC and avoidable FC associated w/ a decision

Question 18

when to make vs. buy?

Answer 18

if relevant cost to make(including oc) <outside purchase

Question 19

When to sell or process further

Answer 19

if incremental rev> increm. cost

Question 20

When to keep or Drop a product line

Answer 20

Keep if :

lost CM> avoided fixed cost

*only consider cost that will change

Question 21

Define Sensitivity analysis

Answer 21

process of experimenting w/ different parameters and assumptions

Question 22

Sensitivity analysis formula

Answer 22

change TC/ change volume

Question 23

Define Forecasting analysis

Answer 23

predicts future values of dependent variables (ex. TC)

Question 24

What is regression analysis formula

Answer 24

y=A+BX

Question 25

Coefficient of Correlation (r)

Answer 25

measures strength of linear relationship between IV & DV

Question 26

Coefficient of Correlation (r2)

Answer 26

proportion of total variation in the TC dependent variable (y) explained by IV (volume)

Question 27

Define High-Low Method

Answer 27

technique used to estimate fixed and variable portions of cost, usually production cost.