BEC Formulas

Question 1

Marginal Propensity to Consume

Answer 1

Change in spending / Change in income

Question 2

Marginal Propensity to Save

Answer 2

Change in savings / change in income

Question 3

Multiplier Effect

Answer 3

[1/(1-MPC)] x Change in Spending

Question 4

Price Elasticity of Demand

Answer 4

% Change in Quantity Demand / % Change in Price

Question 5

Income Elasticity of Demand

Answer 5

% Change in Quantity Demanded / % Change in Income

Question 6

Optimal Production

Answer 6

Marginal Revenue = Marginal Cost

Question 7

Real GDP

Answer 7

Nominal GDP / GDP Deflator x 100

Question 8

Disposable Income

Answer 8

Personal Income - Personal Taxes

Question 9

Return to Scale

Answer 9

% Increase in output / % Increase in Input

Question 10

Accounting Cost

Answer 10

Explicit (Actual) cost of operating a business

Question 11

Accounting Profit

Answer 11

Revenue - Accounting Cost

Question 12

Economic Cost

Answer 12

Explicit + Implicit Cost

Question 13

Economic Profit

Answer 13

Revenue - Economic Cost

Question 14

Number of Units Shipped

Answer 14

Beginning Inventory + Units Started - Ending Inventory

Question 15

EFU (Wt. Avg) for DM or CC

Answer 15

Units shipped + (EI x % Comp [DM or CC])

Question 16

EFU (FIFO) for DM or CC

Answer 16

EFU (Wt. Avg) - (Beg Inv x % Complete)

Question 17

Cost per EFU (Wt. Avg): DM or CC

Answer 17

(Beg. Inv + Current Costs) / EFU WA

Question 18

Cost per EFU (FIFO): DM or CC

Answer 18

(Current Costs) / EFU FIFO

Question 19

Ending WIP

Answer 19

Beg Balance (DM, DL, OH)
+ Current Costs (DM, DL, OH)
- COGM (Goes to FG)
+ [(DM EFUs x Cost per DM EFU) + (CC EFUs x Cost per CC EFU)]

Question 20

Gross Margin

Answer 20

Net Sales - Product Costs

Question 21

Operating Income

Answer 21

Gross Margin - Period Costs

Question 22

High-Low Method Cost Function

Answer 22

(Change in Cost High&Low pts) / (Change in Activity High&Low pts)

Question 23

The Present Value of $1

Answer 23

[1/(1+i)^n]

i = interest rate
n = number of periods

Question 24

Net Present Value (NPV)

Answer 24

PV Future Cash Flows - Investment

Question 25

Profitability Index

Answer 25

PV of Future Net Cash Inflows / Initial Investment

Question 26

Internal Rate of Return (IRR)

Answer 26

PV Factor = Investment / After Tax Annual Cash Inflow

Question 27

Payback Method

Answer 27

Investment / Annual Cash Flow

Question 28

Accounting Rate of Return

Answer 28

Net Income / Average Investment

Question 29

Net Working Capital

Answer 29

Current Assets - Current Liabilities

Question 30

Cash Conversion Cycle

Answer 30

Inventory CP + Receivables CP - Payables DP

Question 31

Inventory Conversion Period

Answer 31

Avg Inventory / (COGS/365)

Question 32

Receivables Collection Period

Answer 32

Avg Receivables / Credit Sales per Day

Question 33

Payables Deferral Period

Answer 33

Avg Payables / (COGS/365)

Question 34

Economic Order Quantity (EOQ)

Answer 34

√(2DO/C) ``` D = Unit Demand (Annual) O = Order Cost C = Cost of Inventory ```

Question 35

Inventory Re-Order Point

Answer 35

Avg Daily Demand x Avg Lead Time Demand = Sales Lead Time = Wait for Inventory Shipment

Question 36

Cost of Forgoing Discount

Answer 36

(Disc% x 365) / [(100% - Disc%) x (Pay Period - Disc Period)]

Question 37

Current Yield

Answer 37

Interest payment / Bond Price

Question 38

Effective (YTM, Market) Rate Bond Price

Answer 38

PV of Principle + Interest

Question 39

CAPM

Answer 39

risk-free interest rate + (the market rate – risk-free interest rate) × beta

Question 40

Cost of Debt

Answer 40

(Interest Expense - Tax Benefit) / Carrying Value of Debt

Question 41

Return on Investment (ROI)

Answer 41

Return / Investment

Question 42

Residual Income

Answer 42

Operating Income - (Required RoR x Invested Capital)

Question 43

Spread

Answer 43

ROI - Cost of Capital

Question 44

Economic Value Added (EVA)

Answer 44

Operating Income (After Tax) - (Net Assets x WACC)

Question 45

Free Cash Flow

Answer 45

Operating Income (After Tax) + Depreciation & Amortization - Capital Expenditures - Change in Net Working Capital

Question 46

Material Variances

Answer 46

Standard Material Costs - Actual Material Costs = Material Variance

Question 47

Labor Variances

Answer 47

Standard Labor Costs - Actual Labor Costs = Labor Variance

Question 48

Overhead Variances

Answer 48

Overhead Applied - Actual Overhead Cost = Total Overhead Variance

Question 49

Contribution Margin

Answer 49

Sales Price (per unit) - Variable Cost (per unit) = Contribution Margin (per unit)

Question 50

Breakeven Point (per unit)

Answer 50

Total Fixed Costs / Contribution Margin (per unit)

Question 51

DM Price Variance

Answer 51

AQ (SP - AP)

Question 52

DM Usage Variance

Answer 52

SP (SQ - AQ)

Question 53

DL Rate Variance

Answer 53

AH (SR - AR)

Question 54

DL Efficiency Variance

Answer 54

SR (SH - AH)