Operations Management (FORMULAS)

Unit Contribution

Price - variable cost

Contribution to fixed costs

Fixed cost/Unit contribution

Total Revenue (TR)

Price x Quantity

Total Cost (TC)

Fixed cost + (Variable cost x Quantity)

Break-even point (BEP)

Total Revenue = Total Cost

Profit or Loss

Total revenue - Total cost

Margin of Safety

Level of Demand - Break-even Quantity

Target Profit Quantity

(Fixed Cost + Target Profit) / (Price - Variable Cost)

Total contribution

Total contribution = Fixed costs/unit contribution

Capacity utilization rate

Actual output / productive capacity x 100

Defect Rate

Defective output / Total Output x 100

Productivity rate

total output / total output

Labour productivity

Total output / number of workers

Capital productivity

Total output / number of capital hours

Operating leverage

(Price - variable cost per unit) x Quantity / [(price - variable cost per unit) x quantity] x 100

Break even point

Fixed costs/ Selling price - Variable cost

Target profit output

(Fixed cost + Target profit)/ Unit contribution