Decision analysis and risk management

Question 0

Operating Income

Answer 0

Total Operating Revenues − Total Operating Costs

Question 1

Total Costs

Answer 1

Total Variable Costs + Total Fixed Costs

Question 2

Net Operating Income

Answer 2

Operating Income − Operating Income Taxes

or

(1 − Relevant Tax Rate) (Operating Income)

Question 3

Breakeven point (operating income will be zero)

Answer 3

Revenues − Variable Costs − Fixed Costs = Operating Income

Or

(USP × Q) − (UVC × Q) − FC = OI

Question 4

Contribution margin percentage

Answer 4

UCM / Selling price

Or

Contribution margin / Total revenues

Question 5

Variable cost percentage is the complement of the contribution margin percentage

Answer 5

Contribution Margin Percentage + Variable Cost Percentage = 1

Question 6

Target operating income

Answer 6

Revenues − Variable Costs − Fixed Costs

Or

(USP × QT) − (UVC × QT) − FCC

Question 7

Contribution margin percentage

Answer 7

Contribution margin / Total revenues

Question 8

Breakeven revenues

Answer 8

Fixed costs / Contribution margin %

Question 9

Weighted average UCM

Answer 9

See book

Question 10

Selling price

Answer 10

Unit Cost + (Markup % on Unit Cost × Unit Cost)

Question 11

Price elasticity of demand

Answer 11

% change in quantity demanded of product X /

% change in price of product X