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23 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What is breakeven analysis?
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The sales level at which sales revenue exactly offsets total costs, both variable and fixed.
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What is meant by Total Costs in breakeven analysis?
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Fixed and variable costs, manufacturing and selling/administrative costs
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The breakeven point is usually expressed in what?
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Sales Units or Dollars
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What approach is used to calculate breakeven in units?
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Contribution Margin per Unit Approach
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What is contribution margin?
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The portion of revenues available to cover fixed costs.
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Portion
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What is the formula for calculating contribution margin?
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Sales Revenue - Variable Costs
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What is contribution margin per unit?
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The dollar amount of the sale an individual unit contributes to covering fixed costs.
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What's the formula for calculating contribution margin per unit?
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CMU = SPU - VCU
CM = Sales Price per Unit - Variable Costs per Unit |
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Besides the dollar amt per unit needed to breakeven, what other information can the contribution margin per unit provide?
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Can provide the # of units needed to breakeven.
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How is Sales Price per Unit (SPU) calculated?
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SPU = Total Sales/# Units Sold
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How is Variable Cost per Unit (VCU) calculated?
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VCU = Total Sales - Fixed Costs/# Units Sold
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What is the formula for calculating the breakeven point in dollars (BPD)?
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BPD = BPU x SPU
Breakeven pt in units * Sales Price per unit |
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When no sales price per unit or variable cost per unit is available, what can be used to calculate breakeven point in dollars?
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Contribution Margin Ratio Approach
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What's the formula for calculating breakeven point in sales dollars?
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BPD =
TFC ------------------- SRev - VCosts --------------- SRev |
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What three elements must be available to calculate the Contribution Margin Ratio?
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Sales Revenue, total variable costs, total fixed costs
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What's the formula for calculating CMR?
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CMR = SRev - VCosts
----------------- SRev |
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What is the contribution margin ratio?
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The % of each sales dollar that is available to cover fixed costs.
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Virtually all breakeven questions on the CPA exam can be solved by what two formulas?
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Breakeven Point in Units &
Breakeven Point in Dollars BPU - TFC/CMU BPD - TFC/CMR |
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What is targeted profit?
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When you want to sales revenue to cover more thant total costs but to also provide a profit.
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What is the formula for calculating targeted profit (TP)?
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TP =
TFC + Targeted Profit/CMU or CMR |
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Breakeven Analysis~~
What is a good way to think about how the contribution margin approach calculates breakeven? |
The CM in the denominator must cover the amt in the numerator.
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Summary:
What are the six main formulas for calculating breakeven? |
CM = SRev - Var Costs
CMU = SPU - VCU BPU = TFC/CMU BPD = TFC/CMR CMR = CM/SRev BP w/Targeted Profit = TFC/CMU or CMR |
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What is the margin of safety?
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The diff between budgeted and actual sales (units or dollars) and breakeven sales (units or dollars).
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