Formulas

Question 1

Price Elasticity of Demand Formula

Answer 1

% Change in Quantity Demanded / % Change in Price

Question 2

Arc Method Price Elasticity of Demand Formula

Answer 2

(Change in quantity demanded/ average quantity demanded)/ (change in price/ average price)

Question 3

Income Elasticity of Demand Formula

Answer 3

% Change in Quantity Demanded / % Change in Income

Question 4

Cross Elasticity of Demand Formula

Answer 4

% change in quantity demanded for product x / % change in price of product y

Question 5

Price Elasticity of Supply Formula

Answer 5

Percentage change in quantity supplied/ % change in price

Question 6

Marginal Propensity to Consume (MPC) Formula

Answer 6

Change in consumption / Change in disposable income

Question 7

Marginal Propensity to Save (MPS) Formula

Answer 7

Change in savings / Change in disposable income

Question 8

Average Fixed Costs (AFC)

Answer 8

Total Fixed Costs / Number of Units Produced

Question 9

Average Variable Costs (AVC)

Answer 9

Total Variable Costs / Number of units produced

Question 10

Returns to Scale Formula

Answer 10

% increase in output/ % increase in input

Question 11

Increase in Output (Multiplier Effect Formula)

Answer 11

Change in Spending/ Marginal Propensity to Save

Question 12

Formula to Calculate Forward Rate

Answer 12

(Forward Rate - Spot Rate)/ Spot Rate X Months in a year/ Months in the forward period

Question 13

Direct Material Usage Variance

Answer 13

Standard Cost x (Standard Quantity - Actual Quantity)

Question 14

Material Price Variance

Answer 14

Actual Quantity x ( Standard Price - Actual Price)

Question 15

Profitability Index Formula

Answer 15

Present value of cash flows not including initial investment/ initial investment

Question 16

Breakeven Sales

Answer 16

Fixed costs / Contribution margin ratio

Question 17

Return on Invesetment

Answer 17

Net Income / Invested Capital

Question 18

Residual Income

Answer 18

Operating income - “Imputed” interest on assets used to generate income

Question 19

Payback Period

Answer 19

Initial Investment / After Tax Annual Cash Flow

Question 20

Breakeven Units

Answer 20

Fixed Costs / Contribution Margin

Question 21

EOQ

Answer 21

Square Root of (2xAxP)/S

Question 22

Cash Conversion Cycle Calculation

Answer 22

Inventory conversion period + Accounts Receivable Period - Accounts Payable Deferral Period

Question 23

Direct Labor Efficiency Variance

Answer 23

Standard Wage (Standard Hours - Actual Hours)

Question 24

Direct Labor Price Variance

Answer 24

Actual Hours Worked ( Standard Wage - Actual Wage)

Question 25

Current Yield Formula

Answer 25

Annual Interest Paid / Bond Market Price

Question 26

Internal Rate of Return (IRR)

Answer 26

Investment/Annual Cash Flows

Question 27

Accounting Rate of Return

Answer 27

Accounting Income/ Annual Cash Flows

Question 28

NPV

Answer 28

PV Cash Inflows
(PV Cash Outflows)
= Net PV

Question 29

National Income

Answer 29

Net domestic product + income earned abroad - indirect business taxes

Question 30

Net Domestic Product

Answer 30

Gross domestic product - depreciation

Question 31

Treasury Bill Market Rate

Answer 31

Risk free rate + Inflation premium

Question 32

Inventory Conversion Period

Answer 32

Average Inventory / COGS per day

Question 33

Accounts Receivable Collection Period

Answer 33

Average AR/ Average Credit Sales Per Day

Question 34

Reorder Point

Answer 34

Average Daily Demand x Average Lead Time

Question 35

Reorder Point With Safety Stock

Answer 35

Average Daily Demand x Average Lead Time + Safety Stock

Question 36

“A” in EOQ Formula

Answer 36

Annual usage of inventory

Question 37

“P” in EOQ Formula

Answer 37

Cost of placing an order

Question 38

“S” in EOQ Formula

Answer 38

Cost of storing or carrying individual unit of inventory for period