Basic Cheat Sheet for Understanding an Income Statement. Included formulas for Break Even Point, Revenue, Safety Margin, Leverage and sample income statement.
Formulas and Concepts
Break Even Point: Sales=Variable Expenses+Fixed expenses+Profit, Break Even Point in Units=Fixed expenses/unit CM, Break Even in Revenue = fixed expense/CM ratio, unit CM= CM/units
Safety Margin=Sales-Break Even Point, CM Ratio= CM/Total Sales, Incremental CM= Increased sales*CM Ratio, Operating Leverage=CM/net operating income, Multiply operating leverage by projected sales increase to determine how much income will increase.
Purchase of raw materials
Raw materials inventory, Jan 1
Raw materials inventory, Dec 31
Direct labor cost
Administrative salaries (non factory)
Other factory overhead
WIP, Jan 1
WIP, Dec 31
Finished goods inventory, Jan 1
Finished goods inventory, Dec 31
1) Schedule of costs of goods manufactured for specified year.
Raw materials, Jan 1
Cheat sheet for income statement, includes formulas for key line items for quick reference.