BEC 1 Flashcards
What is the price elasticity of supply?
Percentage change in quantity supplied / Percentage change in price
- Greater than 1, relativey elastic
- Equal to 1 means unitary elastic
- Less than 1, demand is relatively inelastic
What is the price elasticity of demand?
Sensitivity of the quantity demanded to a change in its price
- Greater than 1, relativey elastic
- Equal to 1 means unitary elastic
- Less than 1, demand is relatively inelastic
What is the Point Method?
Elasticity of Demand
Measures the price elasticity of demand at a given point on the demand curve.
- %Q = [Quantity demanded after the change - Quantity demanded before the change] / Quantity demanded before the change
- %P = [Price after the change - Price before the change] / Price before the change
- %Q/%P = Percentage change in quantity demanded / Percentage change in price
What is the Midpoint Method (Arc Method)
The midpoint method measures the price elasticity of demand of a range for a specified change in a product’s price.
(Q1 - Q2) / (Q1 + Q2)
%
(P1 - P2) / (P1 + P2)
How is the annualized cost of not taking a trade discount calculated?
Offered by suppliers on trade receivables.
What is the effective rate of interest?
Effective interest rate = Interest expense (interest to be paid) / Usable funds (net proceeds)
How do you compute totwal borrowings for a discounted loan?
Total borrowings = Amount needed / (1.0 - stated rate)
In financing arrangements, how do you calculate the effective rate on a discounted loan?
Effective rate on discounted loan = Stated rate / (1.0 - Stated rate)
How do you compute total borrowings with a compensating balance?
Total borrowings = Amount needed / (1.0 - compensating balance)
How do you compute effective rate with compensatory balance?
Effective rate with compensatory balance = Stated rate / (1.0 - Compensating balance %)
What is target operating income?
Target sales in units = (Fixed costs + Target operating income) / (Contribution margin per unit)
Target sales in dollars = (Fixed costs + Target operating income) / (Contribution margin ratio)
How do you compute the equivalent units of production (EUP) under weighted average?
EUP = Total Units Completed this Period + EWIP x Percent Complete
Note: No beginning inventory in calculation
How do you calculate EUP under weighted average?
Total units completed (transferred out) during the current period
+Ending WIP x Percent completed
=EUP under weighted average
First start by determining physical flow.
Physical flow = Beginning WIP + Units started this period = Units transferred out + Ending WIP
How do you calculate weighted average per EUP?
(Beginning WIP costs + Current period costs) / Weighted average EUP
How do you compute the equivalent units of production (EUP) under the FIFO method?
Beginning work in process x Percent left to complete
+Units started and completed during the current period
+Ending work in process x Percent complete
=EUP under FIFO
First start by determining physical flow:
Physical flow = Beginning WIP + Units started this period = Units transferred out + Ending WIP
EUP in beginning work-in-process (work done in the prior period) must be excluded from the calculation.