accounting ch 18 problems
cost equation =
fixed cost + variable cost $17525 plus $0.17 per unit
sales in units at target after tax income
fixed costs + target pretax income/contribution margin per unit
sales in dollars at target after tax income
fixed costs + target pretax income/contribution margin ratio
break even point in units formula
fixed costs/ contribution margin per unit
Step 4: to figure final break even point in composite units
fixed costs/contribution margin per composite unit
break even point in dollars formula
fixed costs/contribution margin ratio
Step 5: to determine how many units it must sell
multiply given ratio number for each specific product by units
using sensitivity analysis to get a revised break even point in dollars
revised fixed costs/revised contribution margin ratio
contribution margin per unit formula
sales price per unit - total variable cost per unit
Step 3: to figure contribution margin for composite unit
subtract variable cost from selling price $160-$96
a contribution margin ratio of 30% means
that for each unit sold $30 contributes to covering fixed cost and profit or that 30 cents per dollar contributes
margin of safety
the amount that sales can drop before the company incurs a loss
high low method to find fixed cost
total cost = fixed cost + (variable cost x units)
high low method to find variable cost per unit
1. subtract change in cost 2. subtract change in units 3. divide to get cost per unit
Step 2: to figure variable costs of a composite unit
4 units @ $13 = $52 2 units @ $18 = $36 1 units @ $8 = $8 variable cost = $96
Step 1: to figure the selling price of a composite unit
4 units @ $20 = $80 2 units @ $32 = $64 1 units @ $16 = $16 selling price = $160
margin of safety formula (percent)
Expected Sales - Breakeven Sales/Expected Sales
pretax income formula
after tax income divided by (1 - tax rate)
contribution margin ratio formula
contribution margin per unit/ sales price per unit
