ACC Exam 1 Formula

If sales increase 3000 and the contribution margin ratio is 20%, how much does contribution margin change in dollars

3000 X .2 = $600

If variable expense ratio is 60%, what is the contribution margin ratio

40%

if a firms DOL is 5 and sales go up 20%, by what % will NOI change

5 x 20%

Contribution Margin Ratio

Contribution Margin / Sales

what is the formula for target profit in dollars

Fixed Expenses + Target Profit (0 if Break-even problem)/ Contribution Margin Ratio

what is the formula for BEP in sales dollars

Fixed expenses / Contribution Margin Ratio

Is it better for the firm to be high leverage or low leverage

IT DEPENDS on managements assessment of what the future will hold. In good times, high operating leverage generates the most income ( but the most loss in bad times). In bad times, low operating leverage means the least decline in income (but also less increase in income in good times).

How does sales mix impact on BEP and Target Profit Analysis

If you sell more of the high margin products, your overall company contribution margin ratio will increase and the BEP and target profit numbers will decrease. If you sell more of lower margin products, your overall company contribution margin will decrease and the BEP and Target Profit numbers will increase.

What is the formula for margin of Saftey %

Margin of Saftey Dollars / Actual sales dollars

Increase in net operating

Percentage increase in unit sales x degree of operating leverage

Contribution Margin per unit

Total Contribution Margin/ Total units sold

Variable expense ratio

Total variable expenses/ total sales

what is the target profit at the break- even point

Zero

What is the formula for margin of Saftey in dollars

actual sales - Break Even Sales

what is the formula for degree of operating leverage

contribution margin/ net operating income

What is the formula for target profit in units

fixed expenses + target profit ( 0 if Break-even problem)/ contribution margin/ unit

what is the formula for BEP in units?

fixed expenses / contribution margin/ unit

What is the formula for margin of Safety in units

margin of Safety dollars/ unit selling price

what is sales mix in a multi-product company

the percentage of each product sold ( for a total of 100% of the sales).

what does operating leverage measure

the volatility of a firms income when volume levels change