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  • Mas Formulas

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    Mackay Family
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    This document outlines several methods for calculating costs and profits, including: 1. The total cost formula of fixed costs plus variable costs per unit multiplied by activity level. 2. The high-low method and least squares regression method for calculating the variable cost per unit and fixed cost. 3. The contribution margin approach for calculating operating profit as sales revenue minus variable costs minus fixed costs. 4. Formulas for calculating break-even points in units and sales and target profit points based on contribution margin ratios and fixed and variable costs. 5. Factors to consider for deciding whether to keep or drop a product line such as its impact on sales, costs, and profits.

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    This document outlines several methods for calculating costs and profits, including: 1. The total cost formula of fixed costs plus variable costs per unit multiplied by activity level. 2. The high-low method and least squares regression method for calculating the variable cost per unit and fixed cost. 3. The contribution margin approach for calculating operating profit as sales revenue minus variable costs minus fixed costs. 4. Formulas for calculating break-even points in units and sales and target profit points based on contribution margin ratios and fixed and variable costs. 5. Factors to consider for deciding whether to keep or drop a product line such as its impact on sales, costs, and profits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    10 views3 pages

    Mas Formulas

    Uploaded by

    Mackay Family
    This document outlines several methods for calculating costs and profits, including: 1. The total cost formula of fixed costs plus variable costs per unit multiplied by activity level. 2. The high-low method and least squares regression method for calculating the variable cost per unit and fixed cost. 3. The contribution margin approach for calculating operating profit as sales revenue minus variable costs minus fixed costs. 4. Formulas for calculating break-even points in units and sales and target profit points based on contribution margin ratios and fixed and variable costs. 5. Factors to consider for deciding whether to keep or drop a product line such as its impact on sales, costs, and profits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Total Cost

    y= a + bx
    Total Cost= FC + (VC/unit *activity)

    High Low Method


    Highest Cost = a + b*highest activity
    Lowest Cost = a + b*lowest activity

    ♥ computefor the vc/unit or "b"


    ♥ substitute to the total cost formula to compute for the fixed cost or "a"

    Least Square Regression Method


    y = na + b*x

    ♥ compute for the summation of x, y, x^2, and xy


    ♥ substitute to the total cost formula
    ♥ for the 2nd equation in "b", look for a number that when multiplied to "n" will total to x then multiply it on both sides o
    ♥ substitute to the total cost formula to compute for the fixed cost or "a"

    Operating Profit (CM Approach)


    Sales
    Less: Variable Costs
    Contribution Margin
    Less: Fixed Costs
    Operating Profit

    Sales Revenue - Total VC - Total FC = Operating Profit


    Total Contribution Margin - Total Fixed Cost = Operating Profit
    Total Contribution Margin = Operating Profit + Total FC

    Contribution Margin
    CM = Unit CM * Sales Units
    CM = CM Ratio * Sales Revenue
    CM Ratio = Unit CM / Selling Price

    BEP in units
    Sales Units * Unit CM = Operating Profit + Total FC
    Target Profit in Units = (Operating Profit + Total FC) / Unit CM
    BEP in units = Total FC / Unit CM

    BEP in Sales
    Sales Revenue * CM Ratio = OP + Total FC
    Target Profit = (OP + Total FC) / CM Ratio
    BEP in sales = Total FC / CM Ratio

    Target Profit point in units


    TPPU = (Total FC + Target Profit) / Unit CM
    Keep or Drop a division or product line
    Drop
    Sales Revenue (xx)
    Cost xx
    Impact on other Product or Division xx(xx)
    Profit

    Prioritized
    Selling Price
    Less: Variable Cost
    Contribution Margin
    Activity or Hours
    CM per Activity or Hour
    then multiply it on both sides of the "y" equation

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