ACC222 Exam 2 Equations

Contribution Margin

Sales - Variable Costs

NOI

CM - Fixed Costs

CM Ratio

CM/Sales

Units to Break-Even

fixed exp/CM per unit

Sales to Break Even

Fixed exp/CM ratio

Units for Target Profit

(Target Profit + FE)/CM per unit

Sales Rev for Target Profit

(Target Profit+FE)/CMR

DOL

CM/NOI

% change of NOI

DOL x % change in sales

margin of safety MOS

Difference between budgeted (or actual) sales rev and break even sales

MOS Equation

Actual sales rev - break even sales

MOS %

MOS $ / Budgeted or actual sales

Product Costs

All costs related to making a product

Period Costs

All other costs (Selling and Administrative exp, rent)

Manufacturing Product Costs

DM, DL, MOH (V+F)

Absorption Costing

All manufacturing costs and total product costs

Variable Costing

Only includes variable manufacturing costs

Traceable Fixed Costs

Costs that are directly associated with a single segment/department

Common Fixed Costs

Costs associated with entire company

Segmented I/S

Sales - VE = CM - Tracebale FC = Segment Margin - Common FC = NOI

ABC Costing Steps

1. Define Activities, activity cost pools, and activity measures.

2. assign overhead costs to activity cost pools

3. calculate activity rates

4. Assign overhead costs to cost objects

5. prepare management reports