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ACCT4 CVP Formulas

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  • What is the formula for degree of operating leverage (DoL)?
    CM / NOI
    NOI / CM
    Sales / CM
    CM / Sales
  • You can use the change in NOI (profit) formula only if:
    Sales volume and/or fixed expenses did change
    Unit CM and CM ratio did change
    Selling price or variable expenses did change
    Sales volume and fixed expenses did not change
  • What is the formula for contribution margin (CM)?
    Sales - Fixed expenses
    Sales - Variable expenses
    Variable expenses - Sales
    Net operating income - Variable expenses
  • What is the formula for target profit (TP) in dollars?
    TP / CM ratio
    (TP + Fixed expenses) / Unit CM
    TP / Unit CM
    (TP + Fixed expenses) / CM ratio
  • What is the formula for margin of safety (MoS) as a percentage of sales?
    Total budgeted or actual sales / BE sales
    BE sales / Total budgeted or actual sales
    MoS ($) / Total budgeted or actual sales
    Total budgeted or actual sales / MoS ($)
  • What is the formula for breakeven point (BE) in dollars?
    Unit CM / Fixed expenses
    CM ratio / Fixed expenses
    Fixed expenses / CM ratio
    Fixed expenses / Unit CM
  • What is the formula for margin of safety (MoS) in dollars?
    Total budgeted or actual sales / BE sales
    BE sales - Total budgeted or actual sales
    BE sales / Total budgeted or actual sales
    Total budgeted or actual sales - BE sales
  • What is the formula for contribution margin per unit (unit CM)?
    CM / Sales
    CM / Units sold
    Units sold / CM
    Sales / CM
  • What is the formula for target profit (TP) in units?
    TP / Unit CM
    TP / CM ratio
    (TP + Fixed expenses) / Unit CM
    (TP + Fixed expenses) / CM ratio
  • What is the formula for change in NOI (profit)?
    (Unit CM x Change in sales (units)) - Change in fixed expenses   -or-    (CM ratio x Change in sales (dollars)) - Change in fixed expenses
  • What is the formula for percentage change in NOI due to a percentage change in sales?
    DOL x % change in sales
    Old NOI x % change in sales
    Old NOI x DOL
    DOL / % change in sales
  • What is the formula for the variable expense ratio?
    Variable expenses / Sales
    Sales / Variable expenses
    Variable expenses / NOI
    NOI / Variable expenses
  • What is the formula for breakeven point (BE) in units?
    CM ratio / Fixed expenses
    Fixed expenses / Unit CM
    Unit CM / Fixed expenses
    Fixed expenses / CM ratio
  • What is the formula for contribution margin ratio (CM ratio)?
    CM / Sales
    Sales / CM
    NOI / CM
    CM / NOI
  • What is the formula for change in total contribution margin?
    Unit CM x Changes in sales (units)   -or-   CM ratio x Change in sales (dollars)
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