accounting 3100 test 2 equations and conceptual

traditional income statement

sales

-cogs

= gross profit

-selling expenses

-admin expenses

= operating income

contribution margin income statement

sales

-variable COGS

-variable selling expenses

=contribution margin

-fixed COGS

-fixed selling expenses

-fixed admin expenses

= operating income

Contribution margin ratio (CM%)

Sales price/CM

or CM+VC/CM

breakeven point

when operating income is 0

breakeven point equation

(fixed cost + operating income/cm per unit

CVP sales revenue formula

x= (fixed cost + operating income)/CM%

where x = sales revenue

margin of safety (sales/units)

current sales-breakeven sales

current units- breakeven units

operating leverage

ex. If sales revenue increases by 2%, by approximately what percentage will

operating income increase?

operating leverage= contribution margin/operating income

OL=4.5(2% inc)=about 9%

production

Production=Sales+Desired Ending Inventory−Beginning Inventory

material budget formula

Materials to Purchase=Materials Needed for Production+Desired Ending Materials−Beginning Materials

cash budget equation

Beginning Cash + Inflows − Outflows = Ending Cash