BUS108 KEY FORMULAS

Total cost

Fixed cost + (Variable cost per unit × Units)

High-low variable cost per unit

(Cost at highest activity − Cost at lowest activity) ÷ (Highest activity − Lowest activity)

High-low fixed cost

Total cost − (Variable cost per unit × Units)

Contribution margin per unit

Selling price per unit − Variable cost per unit

Total contribution margin

Sales − Total variable expenses

Contribution margin ratio

Contribution margin ÷ Sales

Operating income

Contribution margin − Fixed costs

Break-even units

Fixed costs ÷ Contribution margin per unit

Break-even sales dollars

Fixed costs ÷ Contribution margin ratio

Margin of safety ($)

Actual sales − Break-even sales

Target sales units

(Fixed costs + Target operating income) ÷ Contribution margin per unit

After-tax target conversion

Target net income ÷ (1 − Tax rate)

Sales-mix group CM

Sum of (Units of each product in mix × CM per unit)

Break-even sales-mix groups

Fixed costs ÷ Contribution margin per sales-mix group

Markup %

(Selling price − Cost) ÷ Cost × 100

Gross margin %

(Selling price − Cost) ÷ Selling price × 100

Target cost

Target selling price − Desired profit per unit

Total manufacturing costs

Direct materials used + Direct labor + Manufacturing overhead

Direct materials used

Beginning raw materials + Purchases − Ending raw materials − Indirect materials used

Cost of goods manufactured (COGM)

Beginning WIP + Total manufacturing costs − Ending WIP

Cost of goods sold (COGS)

Beginning finished goods + COGM − Ending finished goods

Total job cost

Direct materials + Direct labor + Applied overhead

Unit job cost

Total job cost ÷ Units produced

Predetermined overhead rate (POHR)

Estimated manufacturing overhead ÷ Estimated activity

Applied overhead

POHR × Actual activity

Overhead difference

Actual overhead − Applied overhead