Chapter 21 Cost Behavior and Cost-Volume-Profit Analysis

Variable cost per unit (high-low method, step 2)

(cost at high volume - cost at lowest volume) / (highest volume - lowest volume)

Total costs

fixed cost + (variable cost per unit x number of units)

Fixed cost

total costs - (variable cost per unit x number of units).

We pick either the highest or lowest volume to compute fixed cost.

Contribution margin

Sales - Variable costs

Income

Sales - variable costs - fixed costs

Contribution margin per unit

Selling price per unit - Variable costs per unit

Contribution margin ratio

Contribution per unit / Selling price per unit

Contribution margin ratio (alternative formula)

Contribution margin / Sales

Break-even point in units

fixed costs / Contribution margin per unit

Break-even point in dollars

fixed costs / Contribution margin ratio

Fixed cost (given contribution margin and income)

Contribution margin - income

Margin of safety (dollars)

Expected (or actual) sales - break even sales

Margin of safety (percentage)

(Expected sales - break even sales) / Expected sales

Dollar sales at target income

(Fixed costs + Target income) / Contribution margin ratio

Unit sales at target income (units to be sold to achieve targeted income)

(Fixed costs + Target income) / Contribution margin per unit

Contribution margin at target income (contribution margin income statement)

fixed costs + target income

Sales (Contribution margin income statement)

Contribution margin / Contribution margin ratio

Weighted-average contribution margin per unit

Contribution margin per unit for each product x Sales mix percent for each product

Break-even point in units (for multiproduct company)

fixed costs / Weighted-average contribution margin per unit

Number of units sales of each product type at break-even point(multiproduct company)

break-even point in units x sales mix percent

Contribution margin for each product (multiproduct company)

Unit sales x Contribution margin per unit

Revised forecasted income

(Units sold x Contribution margin per unit) - Fixed costs

Degree of operating leverage

Contribution margin / Income

Change in income (percentage)

Degree of operating leverage (DOL) x Change in sales (%)

Amount of income increase or decrease

Income x Change in income

Product cost per unit (absorption costing)

direct materials per unit + direct labor per unit + variable overhead per unit + fixed overhead per unit

Product cost per unit (variable costing)

direct materials per unit + direct labor per unit + variable overhead per unit

Income under absorption costing (converting income under variable costing to income under absorption costing)

Income under variable costing + Fixed overhead cost in ending inventory - fixed overhead cost in beginning inventory