unit 2 - key equations

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Last updated 2:39 AM on 10/16/26
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12 Terms

1
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variable cost - high low method

v = (HIGH cost - LOW cost) / (high vol - low vol)

2
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contribution margin per unit

sales price per unit - variable cost per unit

3
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contribution margin ratio (%)

contribution margin per unit / sales price per unit

4
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breakeven point - units

total fixed costs / contribution margin per unit

5
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breakeven point - $$$

total fixed costs / contribution margin ratio (%)

6
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target profit - units needed

(fixed costs + target operating income) / contribution margin per unit

7
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target profit - sales $$ needed

(fixed costs + target operating income) / contribution margin ratio

8
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margin of safety - units

expected (or actual) sales - breakeven units

9
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margin of safety - $$

expected (or actual) sales - breakeven sales

10
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margin of safety - %

margin of safety ($) / expected sales

11
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degree of operating leverage

total contribution margin / operating income

12
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indifference point - units

fixed costs (A) + [variable costs (A) * units (A)] = fixed costs (B) + [variable costs (B) * units (B)]

  • set equal & solve for units !!