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Exam 2 - Formulas

Exam 2 - Formulas. Net operating income Average operating assets . ROI = . Net operating income Sales . Margin = . Sales Average operating assets . Turnover = . Margin  Turnover. ROI = . Understanding ROI. Calculating Residual Income. (. ).

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Exam 2 - Formulas

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  1. Exam 2 - Formulas

  2. Net operating income Average operating assets ROI = Net operating income Sales Margin = Sales Average operating assets Turnover = Margin  Turnover ROI = Understanding ROI

  3. Calculating Residual Income ( )

  4. ln(1 + % change in quantity sold)ln(1 + % change in price) Єd = Natural log function Price elasticity of demand Price Elasticity of Demand

  5. Profit-maximizingmarkup onvariable cost -1 = 1 + Єd The Profit-Maximizing Price Under certain conditions, the profit-maximizing price can be determined using the following formula: Using the above markup, the selling price would be set using the formula: Variablecost perunit -1 Profit-maximizingprice ) × = (1 + 1 + Єd

  6. Markup %on absorptioncost (Required ROI × Investment) + S & A expensesUnit sales × Unit product cost = Determining the Markup Percentage The equation for calculating the markup percentage on absorption cost is shown below.

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