Formulas

Question 1

High-Low Method

Answer 1

(High Cost - Low Cost) / (High Output - Low Output)

*Identify the relevant costs from the highest and lowest outputs.

Question 2

Minimum Inventory Level

Answer 2

Reorder Level - (Average Usage x Average Lead Time)

Question 3

Maximum Inventory Level

Answer 3

Inventory Buffer + Maximum Reorder Quantity

Question 4

Reorder Level

Answer 4

(Average Usage x Average Lead Time) +Inventory Buffer

Question 5

Minimum Reorder Quantity

Answer 5

Average Usage x Average Lead Time

Question 6

Maximum Reorder Quantity

Answer 6

Maximum Inventory Level - Inventory Buffer

Question 7

Economic Order Quantity

Answer 7

Square Root of (2 x Ordering Cost x Annual Demand) / Cost of Holding 1 Unit for 1 Year)

Question 8

Average Price per Unit

Answer 8

(Total Value of Opening Inventory + Total Value of Units Added) / (Units of Opening Inventory + Units Added to Inventory)

Question 9

Cost Apportionment

Answer 9

(Value of Apportionment Base of Cost Centre / Total Value of Apportionment Base) x Total Overhead Cost

Question 10

Overhead Absorption Rate

Answer 10

Production Overhead / Activity Level

Question 11

Amount Absorbed

Answer 11

Actual Production Activity x OAR

Question 12

Cost per Unit

Answer 12

Cost of the Batch / Number of Units in the Batch

Question 13

Cost per ‘Good’ Unit

Answer 13

(Cost of the Batch - Scrap Proceeds from Normal Loss) / (Unit Input - Normal Loss Units)

Question 14

Flexed Budget

Answer 14

(Budgeted Sales or Expenses / Budgeted Production Level) x Actual Units Produced

Question 15

Breakeven Point

Answer 15

Fixed Costs / Unit Contribution

Question 16

Breakeven Revenue

Answer 16

Fixed Costs / PV Ratio

Question 17

Profit-Volume Ratio

Answer 17

Contribution / Sales

Question 18

Margin of Safety (in Units)

Answer 18

Budgeted Sales Volume - Breakeven Sales Volume

Question 19

Margin of Safety (%)

Answer 19

((Budgeted Sales Volume - Breakeven Sales Volume) / Budgeted Sales Volume) x 100

Question 20

Target Profit

Answer 20

(Fixed Costs + Required Profit) / Unit Contribution

Question 21

Trade Receivables Collection Period

Answer 21

( Trade Receivables / Revenue) x 365

Question 22

Inventory Holding Period

Answer 22

(Inventory / Cost of Sales) x 365

Question 23

Trade Payables Payment Period

Answer 23

(Trade Payables / Cost of Sales) x 365

Question 24

Working Capital Cycle

Answer 24

Trade Receivables Holding Period + Inventory Holding Period - Trade Payables Payment Period