Write an equation for each item provided:Contribution margin per unit=_______Contribution margin ratio=_______Break-even in units=_______Break-even in dollars=_______Units required to achieve desired profit=_______Dollars required to achieve desired profit=_______Margin of safety ratio=_______
What will be an ideal response?
Contribution margin per unit = Unit selling price ? Unit variable cost
Contribution margin ratio = (Sales ? Variable costs) ÷ Sales
Break-even in units = Total fixed costs ÷ Unit contribution margin
Break-even in dollars = Total fixed costs ÷ Contribution margin ratio; alternatively, break-even in dollars = Break-even point in units × Unit selling price
Units required to achieve desired profit = (Total fixed costs + Desired profit) ÷ Unit contribution margin
Dollars required to achieve desired profit = (Total fixed costs + Desired profit) ÷ Contribution margin ratio; alternatively, dollars required to achieve desired profit = Units required to achieve desired profit × Unit selling price
Margin of safety ratio = (Budgeted sales ? Break-even sales) ÷ Budgeted sales
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Suppose the M1 multiplier is currently 2.23 and the M2 multiplier is currently 7.95. If banks decide to increase the ratio of excess reserves they hold relative to the amount of transaction accounts they hold, how will the multipliers for M1 and M2 be affected (in qualitative, not quantitative, terms)?
What will be an ideal response?
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