B4 ass Flashcards
Tell me what Linear regression is
its the relationship between two or more variables. It is used to predict the value of the DEPENDENT Variable corresponding to the independent variable(s)
What is simple regression? What is multiple regression
simple involves only one independent variable where multiple has more than one
What is the Coefficient of determination (r^2)
proportion of the total variation of Y explained by the independent variable (x)…higher R^2 means better fit on regression line
Cash Conversion Cycle Formula
Days in Inventory + Days sales in A/R - Days of Payables Outstanding
What is the high-low method
used to estimate the fixed and variable portions of total costs…calculated by dividing the difference of high & Low total costs by difference in high & Low volumes to get the VARIABLE COST PER UNIT.
Take th VC per unit multiply by either the high or low Volume
subract the total variable cost from total cost to get the fixed cost
Operating Cash Flow Formula
Cash Flow from operations / End CL
Please sir, explain the diff between absorption costing net income and variable costing net income
Difference depends on the change in inventory level during the period.
No change in inv: Abs Income = Var Income
Increase in Inv: Abs > Var
Decrease in Inv: Abs < Var
Gross Margin Equation
(Net Sales - COGS) / Net Sales
Required Sales Volume for Target Profit Formula
(Fixed Cost - Pretax Profit) / CM per Unit
Margin of Safety ($) Formula
Total Sales ($) - Breakeven Sales ($
Working Capital Turnover Formula
Net Sales / Avg. Working Capital
Selling prices based on assumed volume formula
(Fixed Costs + Variable Costs + Pretax Profit) / Number of Units Sold
Operating Margin Equation
Operating Income / Net Sales
What is the Absoroption Formula
Rev LESS: COGS =Gross Margin LESS: Operating Expenses =Net Income
What is the Contribution MArgin ratio Formula (CM)
Contribution Margin / Revenue
OR
(R - VC) / R
Days Sales in AR Formula
Ending AR (Net) / (Net Sales / 365)
Days Payable Outstanding
Ending AP / (COGS /365)
Days in inventory
Ending INV / (COGS / 365)
Formula for contribution approach
Rev LESS: Variable Costs = Contribution Margin LESS: Fixed Costs = Net Income
Breakeven point in dollars
Total Fixed Costs / Contribution MArgin Ratio
Or
Unit price x breakeven units
Quick Ratio
Cash and equivalents + Short term marketable securities + Net Receivables / CL
Difference between the contribution and absorption approach
Absorption has fixed OH as a product cost while contribtuion approach has fixed OH as a Period Cost
Operating cycle Formula
Days in INVENTORY + Days sales in AR
Times interest earned formula
EBIT / Interest Expense
Breakeven point in UNITS
Total Fixed Costs / Contribution MArgin per Unit
Oppurtunity Cost at full capacity is WHAT??????
at full capacity it is the net benfit given up from the best alternate use of the capacity
How should firms approach special orders
if there is excess capacity then it should be accepted if Selling Price > Variable Cost per Unit
If its at full capcity, the oppurtunity cost should be included in the analysis
How should a firm go about KEEP OR DROP
segments should be kept if the lost contribution margin exceeds avoided fixed costs. amd it should be dropped if the lost contribution margin is LESS than the FC’s avoided
Under Absorption Costing what are the product costs and what are the period costs
PRODUCT COSTS: DM, DL, VMOH, FMOH
PERIOD COSTS: V and F SG&A expenses
Under Variable Costing what are the product costs and what are the period costs
PRODUCT COSTS: Dm, DL, VMOH
PERIOD COSTS: FMOH, V & F SG&A expenses
How do you compute the difference between variable costing NI and absorption costing NI
Step 1: Find Fixed Cost per unit (FMOH / Units Prod. )
Step 2: Find Changes in income ( Change in inventory * Fixed cost per unit)
Step 3: Determine the impact of the change in volume…
ABS NI = Variable: No Change
ABS NI > Variable: Increase in Inv
ABS NI < Variable: Decrease in Inv
Margin of Safet Percentage Formula
Margin of Safety in Dollars / Total sales
target cost formula
market price - required profit
