BEC Formulas Flashcards
Marginal Propensity to Consume
Change in spending / Change in income
Marginal Propensity to Save
Change in savings / change in income
Multiplier Effect
[1/(1-MPC)] x Change in Spending
Price Elasticity of Demand
% Change in Quantity Demand / % Change in Price
Income Elasticity of Demand
% Change in Quantity Demanded / % Change in Income
Optimal Production
Marginal Revenue = Marginal Cost
Real GDP
Nominal GDP / GDP Deflator x 100
Disposable Income
Personal Income - Personal Taxes
Return to Scale
% Increase in output / % Increase in Input
Accounting Cost
Explicit (Actual) cost of operating a business
Accounting Profit
Revenue - Accounting Cost
Economic Cost
Explicit + Implicit Cost
Economic Profit
Revenue - Economic Cost
Number of Units Shipped
Beginning Inventory + Units Started - Ending Inventory
EFU (Wt. Avg) for DM or CC
Units shipped + (EI x % Comp [DM or CC])
EFU (FIFO) for DM or CC
EFU (Wt. Avg) - (Beg Inv x % Complete)
Cost per EFU (Wt. Avg): DM or CC
(Beg. Inv + Current Costs) / EFU WA
Cost per EFU (FIFO): DM or CC
(Current Costs) / EFU FIFO
Ending WIP
Beg Balance (DM, DL, OH)
+ Current Costs (DM, DL, OH)
- COGM (Goes to FG)
+ [(DM EFUs x Cost per DM EFU) + (CC EFUs x Cost per CC EFU)]
Gross Margin
Net Sales - Product Costs
Operating Income
Gross Margin - Period Costs
High-Low Method Cost Function
(Change in Cost High&Low pts) / (Change in Activity High&Low pts)
The Present Value of $1
[1/(1+i)^n]
i = interest rate n = number of periods
Net Present Value (NPV)
PV Future Cash Flows - Investment
Profitability Index
PV of Future Net Cash Inflows / Initial Investment
Internal Rate of Return (IRR)
PV Factor = Investment / After Tax Annual Cash Inflow
Payback Method
Investment / Annual Cash Flow
Accounting Rate of Return
Net Income / Average Investment
Net Working Capital
Current Assets - Current Liabilities
Cash Conversion Cycle
Inventory CP + Receivables CP - Payables DP
Inventory Conversion Period
Avg Inventory / (COGS/365)
Receivables Collection Period
Avg Receivables / Credit Sales per Day
Payables Deferral Period
Avg Payables / (COGS/365)
Economic Order Quantity (EOQ)
√(2DO/C)
D = Unit Demand (Annual) O = Order Cost C = Cost of Inventory
Inventory Re-Order Point
Avg Daily Demand x Avg Lead Time
Demand = Sales
Lead Time = Wait for Inventory Shipment
Cost of Forgoing Discount
(Disc% x 365) / [(100% - Disc%) x (Pay Period - Disc Period)]
Current Yield
Interest payment / Bond Price
Effective (YTM, Market) Rate Bond Price
PV of Principle + Interest
CAPM
risk-free interest rate + (the market rate – risk-free interest rate) × beta
Cost of Debt
(Interest Expense - Tax Benefit) / Carrying Value of Debt
Return on Investment (ROI)
Return / Investment
Residual Income
Operating Income - (Required RoR x Invested Capital)
Spread
ROI - Cost of Capital
Economic Value Added (EVA)
Operating Income (After Tax) - (Net Assets x WACC)
Free Cash Flow
Operating Income (After Tax)
+ Depreciation & Amortization
- Capital Expenditures
- Change in Net Working Capital
Material Variances
Standard Material Costs - Actual Material Costs = Material Variance
Labor Variances
Standard Labor Costs - Actual Labor Costs = Labor Variance
Overhead Variances
Overhead Applied - Actual Overhead Cost = Total Overhead Variance
Contribution Margin
Sales Price (per unit) - Variable Cost (per unit) = Contribution Margin (per unit)
Breakeven Point (per unit)
Total Fixed Costs / Contribution Margin (per unit)
DM Price Variance
AQ (SP - AP)
DM Usage Variance
SP (SQ - AQ)
DL Rate Variance
AH (SR - AR)
DL Efficiency Variance
SR (SH - AH)
