Manecon Midterms Formulas PDF

Marginal Costs Old price x old quantity – New price x new quantity (For MC in goods) Old wage x old number of workers – New wage x new number of workers (For MC in wages) Rule of 72 / Rule of Thumb *Used only when the investor wants to double his investment 72/rate...

Marginal Costs Old price x old quantity – New price x new quantity (For MC in goods) Old wage x old number of workers – New wage x new number of workers (For MC in wages) Rule of 72 / Rule of Thumb *Used only when the investor wants to double his investment 72/rate Contribution Margins Contribution Margin per unit: Unit Selling price-Variable Cost Contribution Margin Percentage: Contribution Margin Per Unit/Unit Selling Price  Break-even Point Break-even Point Sales Volume or Quantity: Fixed Costs/Contribution Margin per unit Break-even Point Peso Sales or Amount: Fixed Costs/Contribution Margin Percentage Proving the BEP Quantity and Amount Sales (Unit Selling Price x BEP Quantity) Variable Costs (Variable Costs x BEP Quantity) Contribution Margin (CM per unit x BEP Quantity) Less: Fixed Costs Net Income (Loss) or Break-even  Computing BEP with Desired Profit given Break-even Sales Volume or Quantity: Fixed Costs+Desired Profit/Contribution Margin per unit Break-even Peso Sales or Amount: Fixed Costs+Desired Profit/Contribution Margin Percentage Present Value & Net Present Value Present Value Note: Depending on the number of years given the process may take longer or shorter than the given illustration below. (Each proposal will pay out within three (3) years) Solution for getting the Present Value: Step 1. Get the Present Value for each Year given in the proposal *If 1 of the years does not pay out any money then its present value will be zero(0) To get the present value of each year: 1st Year: Pay out amount stated in the proposal/discount rate^1 = Present Value 2nd Year: Pay out amount stated in the proposal/discount rate^2 = Present Value 3rd Year: Pay out amount stated in the proposal/discount rate^3 = Present Value Notes: *Discounts rates may be referred to as interest rates in some problems, so if you don’t see any discounts rates in the problem just use the interest rate given. *Tip to save on solving for each proposal: Calculate the squared and cubed amount of the discount rate and note it on the side, it will help you save up some time in calculating for it again in the other proposals stated. *To solve for the Present Value of each Proposals just ADD each present value of each year. (DO NOT SUBTRACT the cash outflow if the problem seeks only the PRESENT VALUE of the Proposals not the NET PRESENT VALUE. Solution for the NET PRESENT VALUE: After getting the TOTAL PRESENT VALUE (add all the present values of each year), subtract the Cash Outflow from the TOTAL PRESENT VALUE to get the NET PRESENT VALUE. Total Present Value-Cash Outflow=Net Present Value Cost Indifference Unit To get the COST INDIFFERENCE UNIT of 2 separate production sites this is the formula being used: FC1 + VC1 (Q) = FC2 + VC2 (Q) *Transpose like terms to each side (change the sign of each number transposed, eg. Positive – Negative) VC1 (Q) - VC2 (Q) = FC2 - FC1 *Once you transposed the liked terms and subtracted/added them divide each side with the sum or difference of the Variable costs Example: VCQ = divide both sides by the amount of the VC VCQ/VC = FCVC *Once you divided both sides the quotient of the FC and VC on the right side in now the Cost Indifference Unit of both Production sites. Cost Indifference Amount Note: You can’t solve for the Cost Indifference Amount if you haven’t solved for the Cost Indifference Unit *Use the same formula as before but now substitute the Cost Indifference Unit you got from the previous problem to the equation. Ex. CIU=5 FC1 + VC1 (Q) = FC2 + VC2 (Q) FC1 + VC1 (5) = FC2 + VC2 (5) *The answers of both sides will be the same, proving the Cost Indifference Unit to be correct. *If given a problem wherein we are to solve for which of the Factories or Production sites will give the lesser Costs for the given units in the problem just use the same formula. (The Left side represents Factory A while the Right side represents Factory B) *Substitute the given units of the problem to the Q in the formula, just like solving for the Cost Indifference Amount After solving, the side with the lesser amount will be the better option to choose. Alternative Way of Knowing: *If you’re short on time and you have already solved for the CIU (Cost Indifference Unit) take note of this. *If the given unit of the problem EXCEEDS or is HIGHER compared to the CIU then CHOOSE THE FACTORY WITH THE LESSER VARIABLE COSTS. *If the given unit of the problem DOES NOT EXCEED or is LOWER compared to the CIU then CHOOSE THE FACTORY WITH THE LESSER FIXED COSTS. Total Average Costs Fixed Costs + (Variable cost per unit x units) Total Average Costs per unit (Fixed Costs/units) + Variable Cost per unit  Price Elasticity /e/= Change in Quantity Percentage/Change in Price Percentage Or /e/= Q1 – Q2 / Q1 + Q2 / P1 - P2 / P1 + P2 Classifications: /e/>1=Elastic /e/1=Elastic /e/1=Elastic /e/