Test 2 Equations

Question 1

Break-Even Point (units)

Answer 1

Fixed Expenses / unit CM

Question 2

Break-Even Point (dollar sales)

Answer 2

Fixed Expenses / CM Ratio

Question 3

Contribution Margin (CM)

Answer 3

Sales - Variable expenses (including selling and admin)

Question 4

CM Ratio

Answer 4

CM / Sales

Question 5

Margin of Safety (in dollars)

Answer 5

Total budgeted (or actual) sales - Break-even sales

Question 6

Margin of Safety (%)

Answer 6

Margin of Safety in dollars / total budgeted (or actual) sales in dollars

Question 7

Unit Sales to reach Target Profit

Answer 7

(target profit + fixed expenses) / unit CM

Question 8

Absorption income statement

Answer 8

Sales
COGS
Gross margin
Selling and Admin
Net operating income

Question 9

Variable costing/Contribution income statement

Answer 9

Sales
Variable cost
CM
Fixed cost
NOI

Question 10

ROI

Answer 10

NOI/Sales X Sales/ Average operating assets

Margin X Turnover

Question 11

Margin

Answer 11

NOI/Sales

Question 12

Turnover

Answer 12

Sales/Average operating assets

Question 13

Variable cost per unit

Answer 13

Dm + dl + variable manufacturing cost

DO NOT include selling and admin or fixed overhead

Question 14

Absorption cost per unit

Answer 14

Dm + Dl + variable manufacturing cost + fixed manufacturing overhead

DO NOT include selling and admin

Question 15

Difference between absorption and variable

Answer 15

Change in inventory x fixed cost per unit