C Formulas

Question 1

How is revenue calculated in a demand curve graph?

Answer 1

Price x Quantity

Question 2

What is meant by price elasticity of demand?

Answer 2

Change in quantity as a % of quantity / Change in price as a % of the price

Question 3

Calculate total costs?

Answer 3

Total costs = Fixed costs + (Variable cost per unit x Quantity sold

Question 4

When MR > MC?

Answer 4

Make and sell the unit

Question 5

When MC > MR?

Answer 5

Don’t make and sell that unit

Question 6

When is profit maximised in terms of MR and MC?

Answer 6

MR = MC

Question 7

Equation for relationship between quantity and price? (Demand curve equation)

Answer 7

P = a - bQ

Question 8

What is meant by P in equation for relationship between quantity and price?

Answer 8

Price per unit

Question 9

What is meant by Q in equation for relationship between quantity and price?

Answer 9

Quantity sold

Question 10

How to calculate total absorption cost?

Answer 10

Marginal cost + fixed overhead absorption rate

Question 11

Break-even calculation?

Answer 11

Fixed costs/contribution per unit

Question 12

Total budgerted fixed costs?

Answer 12

Budgeted cost per unit × budgeted production

Question 13

Contribution per unit?

Answer 13

Selling price − variable costs OR profit per unit + fixed overheads

Question 14

Margin of safety ratio?

Answer 14

(Budgeted sales - break-even sales)/Budgeted sales

Question 15

Revenue required to achieve a target profit?

Answer 15

(Target profit + fixed cost) / C/S ratio

Question 16

Margin of safety (sales revenue) calculation?

Answer 16

Sales - break-even sales

Question 17

Break-even sales calculation?

Answer 17

Fixed costs / C/S ratio

Question 18

Calculate selling price?

Answer 18

Variable cost/(1 – C/S ratio)

Question 19

Relevant cost?

Answer 19

Direct labour cost plus the opportunity cost

Question 20

WHen there is no spare capacity, what is the opportunity cost?

Answer 20

Normal cost + the contribution foregone OR lost revenue - variable costs saved

Question 21

Is salary a relevant cost?

Answer 21

No because it is fixed

Question 22

What is an incremental cash flow?

Answer 22

Additional cash inflows or outflows that arise directly as a result of a specific decision or project

Question 23

Which of the following costs and revenues will be most relevant in deciding whether to sell Product X or to process it further to make Product Y?

Answer 23

Additional cost of making Y, given the cost of making X and additional revenue from Y

Question 24

Revenue required to achieve a target profit?

Answer 24

(Target profit + fixed costs) / CS ratio

Question 25

Calculate margin of safety?

Answer 25

Sales value / selling price per unit

Question 26

Method to cover fixed costs as possible in terms of contribution?

Answer 26

Total contribution from best product Contribution required from 2nd product to break-even Production of 2nd production

Question 27

What does CVP assume about selling price and variable costs?

Answer 27

They are constant over the full range of production

Question 28

Marginal revenue equation?

Answer 28

MR = a - 2bQ

Question 29

b variable calculation?

Answer 29

Change in price / change in sales

Question 30

a variable calculation?

Answer 30

Selling price + (b * monthly demand)

Question 31

What is meant by minimax?

Answer 31

The minimum maximum

Question 32

What is another term for marginal cost?

Answer 32

The variable cost

Question 33

Value of perfect information?

Answer 33

Perfect information - imperfect information

Question 34

Whcih project to choose in terms of perfect and imperfect information?

Answer 34

One with the highest EV

Question 35

When will shadow price be the contribution per unit?

Answer 35

As production of Dee will be restricted

Question 36

Volume of sales calculation?

Answer 36

Total Contribution / contribution per unit

Question 37

When does the shadow price cease to apply?

Answer 37

When direct labour hour constraint is replaced in the optimal solution by the sales demand for Product Y constraint

Question 38

Calculate contribution per unit from C/S ratio

Answer 38

C/S ratio * selling price

Question 39

When there's a constraint in contribution?

Answer 39

Remaining fixed costs / contribution per unit = number of remaining units

Question 40

What is required for a shadow price?

Answer 40

A binding constraint, no binding constraint means no shadow price

Question 41

Margin of safety ($)

Answer 41

Budgeted revenue - break-even revenue

Question 42

Sales revenue to achieve a target profit (multiplication method)

Answer 42

Sales volume to achieve a target profit * unit selling price

Question 43

Weighted average CS ratio?

Answer 43

Total contribution / Total revenue

Question 44

Contribution per unit of limiting factor?

Answer 44

Contribution per unit / units of scarce resource used

Question 45

Saving per unit of scarce resource?

Answer 45

(Buy in price - variable cost to make) / Number of units of scarce resource used per unit

Question 46

What if additional units of a factor become available in a make v buy situation?

Answer 46

More production can be brought in-house, leading to greater savings

Question 47

Full cost plus pricing selling price per unit?

Answer 47

(Total budgeted production cost + total budgeted non-production cost + mark-up) / Budgeted sales units

Question 48

Marginal cost plus pricing selling price per unit?

Answer 48

(Budgeted variable production cost + Budgeted variable non-production cost + mark-up) / Budgeted sales units

Question 49

ROI pricing selling price per unit?

Answer 49

(Budgeted full cost + (Target ROI percentage * capital employed)) / Budgeted sales units

Question 50

Opportunity cost pricing?

Answer 50

Relevant costs + mark-up

Question 51

Expected value calculation?

Answer 51

Weighted arithmetic mean of possible outcomes

Question 52

Sensitivity %?

Answer 52

Profit ÷ Variable