Margins and Profits (Part 1)

Question 1

Fixed Costs

Answer 1

• Definition: Costs that remain unchanged with volume sold.

* Examples: rent for facilities, management salaries, etc.

Question 2

Variable costs

Answer 2

•Definition: Costs that change with volume sold. •Examples: commissions paid to salespeople, and packaging costs, etc.

Question 3

Formula: Total costs ($) = Fixed costs ($) + Total vari

Answer 3

= Fixed costs ($) + Total variable costs 
Total Cost.  Y = mX+ b
Y = total cost
X = Quantity 
b = fixed coost
m = effect of adding one unit

Question 4

Total cost per unit (formula)

Answer 4

= Total cost($) / Quantity (#)

Question 5

Total marketing costs (Formula)

Answer 5

= total fixed marketing costs ($) + total variable marketing cost ($)

Question 6

Total variable marketing cost (formula)

Answer 6

= revenue ($) * Marketing cost percentage (%)

Question 7

Unit Margin ($) (formula)

Answer 7

= Selling Price per Unit ($) –Cost per Unit ($)

Question 8

Margin (%) (formula)

Answer 8

=Unit Margin ($) /Selling Price per Unit ($)

or Total Sales Revenue ($) –Total Cost ($) / Total Sales Revenue

Question 9

Markup % (formula)

Answer 9

= (Selling Price –Cost ) / Cost

Question 10

Selling Price (formula)

Answer 10

= Cost * (1 + Markup %)

Question 11

Average Price per Unit ($) (formula)

Answer 11

= Revenue ($) / Unit Sales (#)

Question 12

Total revenues (formula)

Answer 12

= Selling price per unit * Units sold

Question 13

Profit (formula)

Answer 13

= Total revenues –Total cost

Question 14

Unit breakeven (formula)

Answer 14

= Fixed costs ÷Unit contribution
or
= Fixed costs ÷(Unit selling price –Unit VC)

Question 15

Revenue breakeven (formula )

Answer 15

= Breakeven units * Unit selling price

= [Fixed costs÷(Unit contribution)]* Unit selling price)

= Fixed costs÷(Unit contribution / Unit selling price)

= Fixed costs ÷Contribution margin