Accounting 2 Exam 1 Formulas

VCPU for High Low Method

Change in 2 prices / change in 2 activity levels

Traditional income statement

Sales rev - COGS = GP - other expenses = NI

Contribution income statement

Sales rev - VC = CM - FC = NI

Total CM

Sales rev - VC

CMPU

Selling price PU - VCPU

Contribution Margin Ratio

CM / Sales revenue or CMPU/SPPU

Break even point

Sales = FC + VC

Variable cost ratio

VC/ Sales rev or VCPU/SPPU

Margin of Safety

Actual sales rev - break even sales revenue

Degree of operating leverage

CM/NI

Package CMPU

CMPU * Sales mix #

Make or buy decision

Is Avoidable costs + OC > or < outside purchase price

Keep or drop decision

Is avoidable fixed costs + opportunity costs > or < Lost contribution margin

Special order decision

Is actual selling price of special order > or < minimum acceptable selling price of special order

Minimum acceptable selling price of special order

VCPU of special order + CM lost from giving up regular sales

CM lost

(CMPU * units of regular sales) / units in special order

Sell or process further decision

Is the sales value from further processing - additional processing costs > or < sales value at the split-off point

CMPU of scarce resource

CMPU / Scarce resource needs PU

Objective function

CMPU of object one X + CMPU of object two * Y

Break even units

Total fixed costs/CMR