accounting ch 18 problems

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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


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