formulas intra

Question 1

operating income?

Answer 1

sales - VC = CM - FC = operating income

Question 2

unit CM?

Answer 2

= per unit selling price - per unit VC

Question 3

total CM?

Answer 3

= unit CM * sales volume

Question 4

CM as a % of selling price?

Answer 4

per unit CM / per unit selling price OR total CM / total sales

Question 5

breakeven point (BE)? —> in units & $

Answer 5

BE in units = fixed cost / unit CM
BE in $ = BE in units * per-unit selling price

Question 6

margin of safety —> in units & $

Answer 6

units = actual or expected sales(in # units) - BE in unit
in $ = actual or expected sales (in $) - BE in $

Question 7

potential income?

Answer 7

(per unit CM * volume at MAX capacity) - FC

Question 8

target income?

Answer 8

before tax = (FC + target income) / unit CM = # unit after tax= (FC + [target / (1-tx)] / unit CM = # unit

Question 9

indifference point?

Answer 9

(SP1 - VC1)volume - FC1 = (SP2 - VC2)volume - FC2 => (CM1vol.) - FC1 = (CM2vol.) - FC2 FC1 - FC2 / CM1 - CM2 = Volume

Question 10

controllable margin?

Answer 10

total CM - direct FC

Question 11

CM per unit of limited resources?

Answer 11

per unit CM / # of units of limited resource required to manufacture the product

Question 12

allocation rate (overhead rate)?

Answer 12

estimated annual MOH cost / estimated annual operating activity (using the allocation base ex: mh)

Question 13

make or buy, elements to consider

Answer 13

situation 1 : FC are considered common (if common we do NOT take it into consideration)
situation 2 : FC are considered direct & indirect (we only consider the direct FC in an incremental analysis
situation 3 : calculate an opportunity cost (the diff. between make or buy alternatives, then you add those up to see the impact on income)

Question 14

eliminate an unprofitable segment or product, elements to consider?

Answer 14

situation 1 : common FC ( will the FC still be there if we eliminate the product/segment?)

situation 2 : traceable and common FC (if any, controllable margin)

Question 15

COGM schedule?

Answer 15

1) DM used
beg. DM
+ purchased DM
(-) end DM

2) COGM
beg. WIP
+ DM used + DL + MOH
(-) end WIP

Question 16

income statement?

Answer 16

3) COGS
beg. finished goods (FG)
+ COGM
(-) end FG

4) income statement
sales
(-) COGS
= gross profit
(-) S & A
= operating income

Question 17

minimum selling price

Answer 17

= total costs of special order / # of units in special order

Question 18

what are relevant costs?

Answer 18

1) costs and revenues that differ for each alternative
2) cost and revenue that will occur in the future

(they must be both)

Question 19

opportunity cost; when do we use it and what is the formula

Answer 19

when there is a capacity shortfall
units given up*CM of units given up

Question 20

what is a sunk cost

Answer 20

it is a cost that can’t be recovered (ex: a deposit for an appointment that you can’t make last minute, therefore you can’t get the deposit back no matter the future decision)