Managerial Accounting
Margin of Safety ($$)
Actual minus Break Even equals a number, then that number divided by Actual equals the Margin of Safety percentage
Margin of Safety (Units Sold)
Actual minus Break Even equals a number, then that number divided by Actual equals the Margin of Safety percentage
CVP Analysis
An approach that allows managers to see how a change in one or more of the following factors will impact profitability
Contribution Margin Ratio
Contribution Margin divided by Sales Revenue
Degree of Operating Leverage
Contribution Margin divided by profit
Profit Equation
Profit equals Total revenue minus Total cost; or Profit equals (Unit price times Quantity sold) minus (Fixed cost plus Variable cost).
Contribution Margin
Sales Revenue minus Variable Costs
Break Even Sales Equation
Total Fixed Costs divided by Unit Contribution Margin Ratio
Break Even Units Equation
Total Fixed Costs divided by unit Contribution Margin
Target Profit Analysis Units
Total Fixed Costs plus Target Profit didvided by Unit Contribution Margin
Target Profit Analysis Sales
Total Fixed Costs plus Target Profit didvided by Unit Contribution Margin Ratio
Contribution Margin
difference between the price the item is sold for and how much it costs to produce that item
