1. The contribution format income statement can be expressed in the follonwing eqaatio Profe-(Sales- Variable expenses) -Fixed expenses 2 The CM ratio can also be calculated by dividing the contribution margin per unit by the selling price per unit. 3. Margin of safety in dollars -Total sales Break-even sales 4. The margin of safety cannot be expressed in terms of the mumber of units sold 5. If variable expenses are 70% of sales, CM ratio is half of it or 35%. A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. 6. 7. One advantage of budgeting is that it can uncover potential bottlenecks self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at the top level. Motivation is generally higher when individuals participate in setting their own goals than when the goals are imposed from above. 9. The production budget must be adequate to meet budgeted sales and to provide for the desired ending inventory. 10. 11. Performance evaluation is difficult when actual activity differs from the planned level of activity. 12. Flexible budget cannot show costs that should have been incurred at the actual level of activity Flexible budgets improve performance evaluation. 13. Favorable variance occurs when actual revenue is greater than budgeted revenue. 14. The differences between the master budget amounts and the flexible budget amou are called master budget variances. 15