Formulas

Question 1

Simple Linear Regression

Answer 1

y=a+Bx

Y=dependent variable. Y may total costs measured in dollars for a cost function

x=Independent variable. Variable that explains Y. For example, in a cost function, x would be total activity

a=Y axis intercept. Y is total costs, then a would measure total fixed costs

B=Slope of the regression line. Based upon factors above, B measures the change in total costs due to a one-unit change in output.

Question 2

High/Low Method Formula

Answer 2

1) High Volume-Low Volume
2) High Cost-Low Cost
3) Cost/Units= Variable Cost
4) Total Cost=Fixed Cost+(Variable Cost per Unit*Number of Unit)

Question 3

Absorption Approach Formula

Answer 3

Revenue- Less COGS=Gross Margin-Less Operating Expenses

Question 4

Contribution Approach

Answer 4

Revenue
-Variable Costs (DL, DM, Variable MOH, etc.)
=Contribution Marging
-Fixed Costs (Fixed Overhead, Fixed Selling and General and Adminstrative)

Question 5

Breakeven point in Units

Answer 5

Total fixed costs/Contribution Margin per Unit

Question 6

Breakeven point in Dollars

Answer 6

Unit Price*Breakeven point in units

or

Total fixed costs/Contribution Margin Ratio

Question 7

Sales Unit for Desired Profit

Answer 7

Sales (Units)=Fixed Cost+Pretax profit/contribution margin per unit.

Question 8

Sales Dollars for Profit

Answer 8

Variable costs+fixed costs+pretax profit

Or

Fixed cost+pre tax profit/contribution margin ratio

Question 9

Margin of Safety

Answer 9

Sales in dollars-Breakeven point

Question 10

Margin of Safety %

Answer 10

margin of safety in dollars/Sales

Question 11

Target Cost

Answer 11

Market Price-Profit

Question 12

Current Ratio

Answer 12

Current Assets/Current Liabilities

Higher Ratio the better, as it shows easy to pay off short term liabilities

Question 13

Working Capital

Answer 13

Current Assets-Current Liabilities