Untitled document-6 - cheat sheet PDF

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cheat sheet...

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nswer the following questions.

Contribution margin = Revenue - Variable Costs Contribution Margin Ratio = (Revenue - Variable Costs)/Revenue

 Sales (5,700 units) $ 319,200 Variable expenses 188,100 Contribution margin 131,100 Fixed expenses 106,500 Operating income $ 24,600 19. If Rovinsky Corporation sells 5,300 units, its operating income should be closest to: A. $24,600 B. $2,200 C. $22,874 D. $15,400 20. If Rovinsky Corporation sells 5,300 units, it’s margin of safety (the gap between current sales and break-even sales), in number of units, would be closest to: A. 400 units B. 4,630 units C. 670 units D. $23 per unit E. $15,400 

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Profit = Revenue - Variable Cost - Fixed Costs More specifically: Profit = (Price * Quantity) - (Variable Cost per Unit * Quantity) - Fixed Costs  

Break even quantity = Fixed Costs/(Price - Variable Cost per Unit) (Unit CM is equal to "Price - Variable Cost per Unit")

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Break even revenue = Fixed Costs/Contribution Margin Ratio

1. Selling price is constant. The price of a product or service will not changeas volume changes. 2. Costs are linear and can be accurately divided into variable and fixed components. The variable costs are constant per unit and the fixed costs are constant in total over the entire relevant range. 3. In multiproduct companies, the mix of products sold remains constant.

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Direct Costs: ·

Direct Materials (Variable)

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Direct Labor (Variable)

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Indirect Costs: 

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Variable manufacturing overhead

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Fixed manufacturing overhead

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Fixed Selling Expense

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Fixed Administrative Expense

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Sales Commission (Variable)

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Variable Administrative Expense

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Period Costs – Costs not related to product production: 

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Sales Commission

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Variable Administrative Expense

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Fixed selling expense

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Fixed administrative expense

Av. Fixed Man. Cost = Total Fixed Manufacturing Cost / Number of units produced 

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Total manuf. OH = Av. Fix. Cost * num of units + Var. OH / unit * num of units 

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