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3 terms

Formulas to know:

Profit= Sales- Variable Costs- Fixed Costs

(formula w/ total sales & variable costs)

Profit= SP(x)- VC per unit (x)- Fixed Costs

(formula w/ per unit sales & variable costs)

-To solve for breakeven point (in units) set profit= $0

(formula w/ total sales & variable costs)

Profit= SP(x)- VC per unit (x)- Fixed Costs

(formula w/ per unit sales & variable costs)

-To solve for breakeven point (in units) set profit= $0

Contribution Margin (CM)

CM per unit= Sales Price - Variable Cost per unit

-Sales price can be broken up into 2 parts: Variable Cost and Contribution Margin

Sales$

-VC

=CM

-FC

=Profit

-Sometimes in problems, variable costs or contribution margin will be expressed as % of sales price:

CM ratio=CM/SP

-Sales price can be broken up into 2 parts: Variable Cost and Contribution Margin

Sales$

-VC

=CM

-FC

=Profit

-Sometimes in problems, variable costs or contribution margin will be expressed as % of sales price:

CM ratio=CM/SP

Other formulas

# units= (Profit+ FC)/ (CM per unit)

Sales (in $)= (Profit+ FC)/ (CM ratio)

Sales (in $)= (Profit+ FC)/ (CM ratio)