45 terms

Managerial Accounting Equations Test 2

Y=FC + VC (X)
Mixed Cost Equation (also used in High-Low Method)
DOL = total CM / NOI
Degree of operating leverage
MOS in % = MOS in $ / Total Budgeted or actual sales in $
Margin of Safety Percentage
Actual S - BE S
Margin of Safety
VE ratio = VE / S
Variable Expense Ratio
Unit S = (TP + FE) / Unit CM
Formula Method Target Profit (Units)
$ S = (TP + FE) / CM Ratio
Formula Method Target Profit (Dollars)
Unit CM = Pr - V
Unit CM
CM Ratio = CM / S
CM Ratio
CM = S - VC
Contribution Margin
BE in $ = FE / CM Ratio
Break Even in Dollars
BE in units = FE / Unit CM
Break Even in Unit Sales
P = (S - VE) - FE ::::
P = (Unit CM x Q) - FE ::::
P = (CM Ratio x S) - FE
3 forms of Master Equation
S = Pr x Q
How to Calculate S of Master Equation
VE = unit V x Q
How to Calculate VE of Master Equation
VC = change in cost / change in activity
Variable Cost
level of activity: performed each time a unit is produced, should be proportional to the number of units produced
level of activity: performed each time a batch is handled/processed, regardless of how many units there are in the batch
level of activity: relate to specific products, typically must be carried out regardless of how many batches are run or units are sold
relate to specific customers, not tied to any specific product
carried out regardless of customers, products, batches, or units (basically other)
Unit level
power to run processing equipment
Batch level
placing purchase orders
Batch Level
setting up equipment
batch level
arranging for shipments to customers
product level
designing a product
product level
advertising a product
product level
maintaining a product manager and staff
customer level
sales calls
customer level
catalog mailings
customer level
general technical support
organization sustaining
heating the factory
organization sustaining
cleaning executive offices
organization sustaining
providing a computer network
organization sustaining
arranging for loans
organization sustaining
preparing annual reports to shareholders
customer level
Sales representatives' periodic visits to customers to keep them informed about the services offered by CD express
product level
ordering labels from the printer for a particular CD
batch level
setting up the CD duplicating machine to make copies from a particular master CD
batch level
Loading the automatic labeling machine with labels for a particular CD
unit level
Visually inspecting CDs and placing them by hand into protective plastic cases prior to shipping
product level
preparation of the shipping documents for the order
organization sustaining
periodic maintenance of equipment
organization sustaining
lighting and heating the company's production facility
organization sustaining
preparation of quarterly financial reports