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= NPV (Net Present Value)
Present Value of Future Cash - Investment
chap. 12
= Profitability Index
PV of Future Cash Flows / Net Initial Investment
chap. 12
= Payback Period
Investment / Net Annual Cash Inflows
(assuming equal cash inflows)
chap. 12
= ARR (Accounting Rate of Return)
(Savings/year - cost/year) / Investment
chap. 12
ROI (Return on Investment)
Income/Investment = Op. Income/Assets
chap. 10
= RI (Residual Income)
Income - (% Cost of Capital x Investment)
chap. 10
= Price/ rate Variance
|A.Price - Std.Price| x A.Quantity
chap. 11
= Usage/Quantity/efficiency Variance
|A.Quantity -S.Quantity| x S.Price
chap. 11
Variance Chart:
Master Budget
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Act. Flex Mas.
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Flex. Budget Variance Sales Activity Variance
/ \
Price/Rate Usage/Quantity
General Rules for Budgeting
What Goes Out + Ending - Beg. = What You Need
(COGS) (Purchase)
chap. 9
= Ending Cash
Cash Available - Disbursements + Financing
chap. 8/9
Cost Plus Pricing
Cost + Profit = Price
chap. 7/8
= Margin of Safety
Actual Sales - Breakeven Sales
chap. 7/8
= Operating Leverage (Degree)
Contribution Margin / Op. Income
chap. 7/8
Target Costing
Revenue at Market Price - Profit = Cost
chap. 6
= Pre-Determined Overhead Rate
Total MOH Cost / Level of Application Base
chap. 3/4
Product Costs
DM + DL + Factory Overhead (COGS)
chap 1/2/3
Prime Costs
DM + DL
chap. 1
Period Cost
Anything that is not a product cost
chap. 1
Conversion Costs
DL + Factory Overhead
chap. 1
= Contribution Margin
Sales - Variable Costs
chap. 3
= Gross Margin
Sales - COGS
chap. 3
Desired # of Units
(F. Costs + Op. Income) / CM per unit
Break-even (# units)
F. Costs / CM per unit
Desired Revenue
(F. Costs + Op. Income) / CM ratio
Break-even (in $)
F. Costs / CM Ratio
Contribution Margin Ratio
CM per unit / Sales Price per unit