Unit 2 Formulas

Fixed Cost / Unit Contribution Margin

• Target profit (units)

• Break-Even Sales (units)

• Margin of Safety (units)

• Contribution Margin Ratio

(FC + Target Profit) / Contribution Margin Ratio

• Target Profit (dollars)

• Break-Even Sales (dollars)

• Margin of Safety (dollars)

• Total Contribution Margin

Total Contribution Margin / Net Operating Income

• Fixed Costs

• Contribution Margin Ratio

• % of Change in Net Income

• Degree of Operating Leverage

% of Change in Sales * DOL

• Fixed Costs

• Contribution Margin Ratio

• % of Change in Net Income

• Degree of Operating Leverage (DOL)

Margin of Safety Units / Sales in Units

• Margin of Safety Ratio

• Margin of Safety Dollars

• Degree of Operating Leverage

• Unit Contribution Margin

Sales Dollars - Break Even Dollars

• Fixed Costs

• Degree of Operating Leverage

• Sales Revenue

• Margin of Safety Dollars

High Low Method:

(Difference in Total Cost) / (Difference in Activity)

• Net Operating Income

• Variable Cost per Unit