Chapter 3: Cost-Volume-Profit Analysis Flashcards
What is the basic formula to find operating income?
Revenue
-
Variable Costs
-
Fixed Costs
What is the formula to find revenue?
Selling price
x
Quantity sold
What is the formula to find variable costs?
Variable cost per unit
x
Quantity Sold
What is contribution margin?
Revenue
-
Variable costs
The portion of income used to cover fixed costs and make a profit.
What is contribution margin per unit?
Unit price
-
Unit variable cost
What is another way to calculate contribution margin?
Unit contribution margin
x
Units sold
What is the contribution margin ratio?
Unit contribution margin
/
Unit Price
What is the breakeven point?
Sales
-
Variable costs
-
Fixed costs
=
0
How do you calculate the breakeven point in units?
Fixed costs
/
Contribution margin per unit
How do you calculate the breakeven point in revenues?
Fixed costs
/
Contribution margin ratio (%)
How do you calculate the amount of units you need to sell to make a specific profit?
Fixed Costs
+
Operating Income
/
Contribution margin per unit
How do you calculate net income (after-tax income)?
Operating income
x
1 - Tax Rate
How do you calcuate the operating income with tax information?
Net Income
/
1 - Tax Rate
What is margin of safety?
Measures the distance between budgeted sales and breakeven sales–and is an indicator of risk.
Budgeted Sales
-
Break even Sales
How is the margin of safety ratio calculated?
Margin of safety
/
Budgeted sales
