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Accounting Final Formulas
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Terms in this set (18)
High-low method
Change in total costs / high minus low activity level = variable cost per unit
Contribution margin per unit
Unit selling price - unit variable costs = contribution margin per unit
Contribution margin ratio
Contribution margin per unit / unit selling price = contribution margin ratio
Contribution margin for break-even units
Fixed costs / contribution margin per unit = break-even point in units
Contribution margin for break-even dollars
Fixed costs / contribution margin ratio = break-even in dollars
Mathematical equation for target net income
Required sales = variable costs + fixed costs + target net income
Contribution margin technique for target net income (units)
Fixed costs + target net income / contribution margin per unit = required sales in units
Contribution margin technique for target net income
Fixed costs + target net income / contribution margin ratio = required sales in dollars
Margin of safety
Actual sales - break-even sales = margin of safety in dollars
Margin of safety ratio
Margin of safety in dollars / actual (expected) sales = margin of safety ratio
Weighted average unit contribution margin (2 products)
(Unit contribution margin x sales mix percentage) + (unit contribution margin x sales mix percentage) = weighted-average unit contribution margin
Break even point in units
Fixed costs / weighted-average unit contribution margin = break-even point in units
Weighted-average contribution margin ratio
(contribution margin ratio x sales mix percentage) + (contribution margin ratio x sales mix percentage) = weighted-average contribution ratio
Break even point in dollars
Fixed costs / weighted-average contribution ratio = break-even point in dollars
Effect on margin of safety ratio
(Actual sales - break-even sales) / actual sales = margin of safety ratio
Operating leverage
Contribution margin / net income = degree of operating leverage
Production budget
Budgeted sales units + desired ending finished goods units - beginning finished goods units = required production units
Return on Investment
controllable margin / average operating assets = return on investment
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