AC505 Formula Template-Final Prep
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AC505 Formula Template-Final Prep

Course Number: AC505 AC505, Spring 2012

College/University: Keller Graduate School...

Word Count: 6778

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WK 1: COST OF GOODS SOLD Direct Materials (DM) = Direct Labor (DL) = Overhead (OH) = Total Manufactured Cost = $100 $200 Answered in Question $230 Answered in Question $530 Beginning Raw Materials Inventory (+) Purchases Raw Materials Avail for Use (-) End Raw Materials Inv. (=) Raw Materials Used In Prod. $10 $120 $130 $30 $100 Sales Revenue (-) Cost of Goods Sold (Product Cost) (CGM) (=) Gross Margin (CGM)...

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1: WK COST OF GOODS SOLD Direct Materials (DM) = Direct Labor (DL) = Overhead (OH) = Total Manufactured Cost = $100 $200 Answered in Question $230 Answered in Question $530 Beginning Raw Materials Inventory (+) Purchases Raw Materials Avail for Use (-) End Raw Materials Inv. (=) Raw Materials Used In Prod. $10 $120 $130 $30 $100 Sales Revenue (-) Cost of Goods Sold (Product Cost) (CGM) (=) Gross Margin (CGM) $950 $560 $390 Beginning Work in Progress Inventory (+) Current Month Manufactured Total Manufactured Cost (-) End Work In Progress (=) Cost of Goods (Manufactured) (CGM) $70 $530 $600 $40 $560 Sales Revenue (=) Cost of Goods Sold (CGM&S) (=) Gross Margin (-) Period Cost Selling Cost General and Admin Cost (=) Net Operating Cost/Income $950 $580 $370 Beginning Finished Goods Inventory (+) Cost of Goods Manufactured Goods Available for Sale (-) End Finished Goods Inventory (=) Cost of Goods Sold (CGM&S) $100 $560 $660 $80 $580 (=) Cost of Goods Sold (CGM&S) (=) Gross Margin (=) Net Operating Income $580 $370 $130 $100 $140 $130 WEEK 1: HI-LO METHOD Step 1 Chg $ (Divide) Chg Units Y X Indirect Mfg. Labor Costs Machine Hours High Observation -Week 8 Low Observation -Week 3 Step 2 Y = A + B(X) Fixed Cost Element = Total cost -Variable Cost Element Y= Money High and Low Variable A= Fixed Monthly Maint Cost #DIV/0! B= Variable Cost #DIV/0! X= Units High and Low Variable Step 1 Money Units High (-) $0 Low $0 (=) Sum $0 High Y= $#DIV/0! A (+) #DIV/0! #DIV/0! Y= $#DIV/0! A (+) #DIV/0! #DIV/0! Formula Low Formula Total #DIV/0! (=) B Value B #DIV/0! #DIV/0! (X) 0 Sum B(X) #DIV/0! B #DIV/0! #DIV/0! (X) 0 Sum B(X) #DIV/0! W EEK 2: Job Order-Process Costing MASTER FORMULA Problem S1: Units to Account For: Beginning WIP Inventory (+) Units Started (=) Units to Account For MASTER FORMULA Percentage Completed Direct Materials 80% Conversion (DL+OH) 15% Units (Step 1 & 2 Must Match) Percentage Completed Direct Materials 70% Conversion (DL+OH) 30% Units (Step 1 & 2 Must Match) S2: S2: Account for Them Completed & Shipped Out WIP Ending Inventory (=) Units to Account For Units 5,600 800 6,400 S3: Equivalent Units Completed & Shipped Out W IP Ending Inventory (=) Units to Account For Direct Materials 5,600 560 6,160 S4: Get the $$ Amounts Spent $ Last Month Spent $ This Month Total Direct Materials $6,900.00 $112,500.00 $119,400.00 Conversion (DL+OH) $2,500.00 $210,300.00 $212,800.00 Get Per Unit Cost Direct Materials $119,400.00 6,160 $19.38 $ XX,XXX XXX,XXX Units Conversion (DL+OH) $212,800.00 5,840 $36.44 Reconcile Transfer Out Units 5,600 Rate $55.82 Total $312,600.25 Ending WIP Direct Materials Conversion (DL+OH) Units 560 240 Rate $19.38 $36.44 Subtotal Total $10,854.55 $8,745.21 $19,599.75 Account for Them Completed & Shipped Out WIP Ending Inventory (=) Units to Account For Units 6,400 1,500 7,900 Percentage Completed Direct Materials 80% Conversion (DL+OH) 70% Units (Step 1 & 2 Must Match) Equivalent Units Completed & Shipped Out W IP Ending Inventory (=) Units to Account For Direct Materials 6,400 1,200 7,600 Conversion (DL+OH) 6,400 1,050 7,450 S4: Get the $$ Amounts Spent $ Last Month Spent $ This Month Total Direct Materials $9,100.00 $96,700.00 $105,800.00 Conversion (DL+OH) $5,400.00 $180,700.00 $186,100.00 Total $14,500.00 $277,400.00 $291,900.00 Direct Materials $105,800.00 7,600 $13.92 $ XX,XXX XXX,XXX Units Conversion (DL+OH) $186,100.00 7,450 $24.98 RATE $38.90 Reconcile Transfer Out Units 6,400 Rate $38.90 Total $248,965.88 Ending WIP Direct Materials Conversion (DL+OH) Units 1,200 1,050 Rate $13.92 $24.98 Subtotal Total $16,705.26 $26,228.86 $42,934.12 RATE $55.82 Sample Cost Equivalent Units (eq) Total S6: Percentage Completed Direct Materials 80% Conversion (DL+OH) 25% Units (Step 1 & 2 Must Match) Cost Equivalent Units (eq) Total Total $9,400.00 $322,800.00 $332,200.00 Units 700 7,200 7,900 S3: Conversion (DL+OH) 5,600 240 5,840 S5: Problem S1: Units to Account For: Beginning WIP Inventory (+) Units Started (=) Units to Account For Units 400 6,000 6,400 S5: S6: Get Per Unit Cost Sample Total $332,200.00 Step 4 and 6 Totals Must Match Cost Accting System - External Ending WIP Inventory Equivalent Units of Production Cost per Unit Total Units Completed and Transferred Units Transferred to Next Dept Cost per Unit Application Rate Applied Overhead = Direct Materials Conversion (DL+OH) $119,400.00 $Direct Materials $212,800.00 $Conversion (DL+OH) $212,800.00 $- $119,400.00 $- Budgeted Overhead (Divide) Budgeted Cost Machine Hrs Budgeted Activity Level (Main Idea Cost) Actual Activity Level Application Rate (x) Actual Direct Labor #DIV/0! Applied Overhead (+) Material Cost (+) Labor Cost Application of Overhead Account Title WIP Inventory Manufacturing OH Cost Accting System - External Ending WIP Inventory Equivalent Units of Production Cost per Unit Total $Total Total Credit #DIV/0! #DIV/0! Over Applied or Under Applied Actual Overhead (-) Applied OH Total (Disposal of Varienace) Total Rate #DIV/0! $186,100.00 $Conversion (DL+OH) $186,100.00 $- $105,800.00 $- Total Application Rate (Divide) Applied Overhead = Budgeted Overhead Budgeted Cost Machine Hrs Budgeted Activity Level (Main Idea Cost) Applied Overhead (+) Material Cost Debt Credit #DIV/0! #DIV/0! Over Applied or Under Applied Actual Overhead (-) Applied OH Total (Disposal of Varienace) #DIV/0! #DIV/0! (+) Labor Cost #DIV/0! Application of Overhead Account Title WIP Inventory Manufacturing OH #DIV/0! #DIV/0! Positive Outcome = Underapplied Negative Outcome = Overapplied Debt Credit #DIV/0! #DIV/0! Disposal Varience Account Title WIP Inventory Manufacturing OH Debt Total $Total $Total Rate #DIV/0! Actual Activity Level Actual Direct Labor Application Rate (x) #DIV/0! #DIV/0! Positive Outcome = Underapplied Negative Outcome = Overapplied Disposal Varience Account Title WIP Inventory Manufacturing OH Conversion (DL+OH) $105,800.00 $Direct Materials $- #DIV/0! Debt Direct Materials Units Completed and Transferred Units Transferred to Next Dept Cost per Unit (=) Total Job #DIV/0! Total $291,900.00 Step 4 and 6 Totals Must Match Credit #DIV/0! #DIV/0! Total #DIV/0! (=) Total Job #DIV/0! Mod 3.1 TEST 2.2 - Contribution Margin . Contribution Margin Total Revenues $1,350,000 (-) Var Cost $245,000 $500,000 Total VC Contribution Margin Total Fixed Cost (=) Net Income Mod 3.1 TEST 2.1 - Contribution Margin Contribution Margin Per Unit Total $750,000 $20 $4 $6 $4 Revenues (-) Var Cost $745,000 $605,000 $270,000 $100,000 $110,000 $480,000 $125,000 Total VC Contribution Margin $34 $749,966 $150,000 $110,000 Total Fixed Cost (=) Net Income Mod 3.1 TEST 2.3 - Contribution Margin Per Unit $260,000 $489,966 100.00% CM Ratio 1.0000 CM Ratio Contribution Margin Revenues (-) Var Cost Total VC Contribution Margin Total Fixed Cost (=) Net Income Total $1,400,000 $450,000 $245,000 $145,000 $840,000 $560,000 $195,000 $100,000 Total Fixed Cost (=) Net Income Mod 3.2 PRE-TEST 40% CM Ratio 0.40 CM Ratio $285,000 $465,000 $100,000 $150,000 $250,000 $215,000 Total $1,000,000 Revenues (-) Vararible Cost Direct Materials Direct Labor Variable Overhead Variable Selling (=) Total Var Cost Contribution Margin (-) Fixed Cost Fixed Overhead Fixed General and administrative $295,000 $265,000 Mod 3.1 TEST 2.1 - Contribution Margin Contribution Margin Total Revenues $750,000 (-) Var Cost $125,000 $90,000 $70,000 Total VC Contribution Margin Per Unit Per Unit $50 $20.00 $4.00 $6.00 $4.00 $680,000.00 $320,000.00 CM/Unit Percent $150,000.00 $110,000.00 $34.00 $16.00 32.00% Per Unit (=) Total Fixed Cost (=) Net Income Units Produced Units Sold $260,000 $60,000 25,000 per month 20,000 Total FC+Target Profit (DIVIDED By) Contribution Margin Ratio 62.00% CM Ratio 0.6200 CM Ratio Contribution Margin Ratio Per Unit Fixed cost (diveded by) Contribution Margin per unit Breakeven Point Contribution Margin Ratio Fixed cost (diveded by)+ Desired Profit Contribution Margin per Unit Perccent Breakeven Point (Units to Make) 260,000.00 $16.00 16,250.00 0.3200 - Margin of Safety Formula Sales $1,000,000.00 Breakeven Sales $Margin of Safety in Dollars $1,000,000.00 Margin of Safety Percentage 0% Degree of Leverage Contribution Margin (divided) Net Operating Income (=) Degree Of Operating Leverage $320,000 $60,000 5.33 For Break Even the Value is Always ZERO $- Target Profit Susies Discount Sundresses, March Production Activity Direct Materials $20.00 Direct Labor $4.00 Variable Overhead $6.00 Fixed Overhead $150,000.00 Variable Selling $4.00 Fixed General and administrative $110,000.00 Units Produced 25,000 Units in beginnning finished goods Units Sold 20,000 Selling Price $50.00 per unit per unit per unit per month per unit per month per month per unit Reconcile between the Variable and Absorbortion Costing Total Revenues (-) Vararible Cost Direct Materials Direct Labor V ariable Manufacturing Overhead Variable Selling & Admin (=) Total Var Cost Contribution Margin Variable Costing w/o Var. Selling & Admin) (-) Fixed Cost Fixed Manufacturing Overhead Fixed Selling and Administrative Per Unit $70,000 $10 $$$4.00 $3.00 $49,000.00 $21,000.00 CM/Unit Percent $16,000.00 $4,000.00 (=) Total Fixed Cost (=) Net Income $7.00 $3.00 $4.00 30.00% $20,000 $1,000 Total FC+Target Profit (DIVIDED By) Contribution Margin Ratio Contribution Margin Ratio Per Unit Fixed cost (diveded by) Contribution Margin per Unit Breakeven Point Cost Per Unit $70,000.00 $$28,000.00 $21,000.00 Finding Net Operating Income (Absorbtion Style) Sales Less Variable Expenses Beginning Inventory $COGM $48,000.00 Goods Avail For Sale $48,000.00 Less Ending Inventory $6,000.00 Gross Margin Selling and Admin Expenses Net Operating Income Absortion Cost - Per Unit Fixed Manufacturing Overhead Units Produced A bsortion Cost - Per Unit 20,000.00 $3.00 6,666.67 $1.20 Finding Net Operating Income Variable Style) Sales Less Variable Expenses Beginning Inventory V ar. COGS V ar. Selling & Admin Contribution Margin Less Ending Inventory Fixed Manufacturing Overhead Fixed Selling and administrative Net Operating Income Company Name Direct Materials per unit Direct Labor per unit Variable Manufacturing Overhead $4.00 per unit Fixed Manufacturing Overhead $16,000.00 per month V ariable Selling & Admin $3.00 per unit Fixed Selling and Administrative $4,000.00 per month Units Produced 8,000 per month Units in beginnning finished goods Units Sold 7,000 Selling Price $10.00 per unit $49,000.00 $21,000.00 $16,000.00 $4,000.00 $1,000.00 Unit Product Cost Direct Materials Direct Labor V ariable Manufacturing Overhead (+) Total Variable Cost (+) Absorbtion Cost (=) Unit Product Cost Changes of the two Systems Variable Net Oper. Income A bsorbtion Net Oper. Income Difference $16,000.00 8,000 $2.00 $$$4.00 $4.00 $2.00 $6.00 $1,000.00 $3,000.00 $(2,000.00) $70,000.00 $42,000.00 $28,000.00 $25,000.00 $3,000.00 Finding Net Operating Income (Absorbtion Style) Sales Less Variable Expenses Beginning Inventory $COGM $48,000.00 Goods Avail For Sale $48,000.00 Less Ending Inventory $6,000.00 Gross Margin Selling and Admin Expenses Net Operating Income $70,000.00 $42,000.00 $28,000.00 $25,000.00 $3,000.00 ABC Internal The Company Direct Labor Direct Materials ProPats Radio $120,000 $1,500,000 Units Produced 20,000 Activity Cost Pool Supervision Inspection Machine Use CD Player $30,000 $500,000 Applied Overhead = Est. Budgeted Overhead Budgeted Cost Labor Hrs Application Rate (x) 0.40 $0.40 $20.00 $40.00 Inspection Application Rate (Divide) Est. Activity cost Activity Cost $150,000 direct labor dollars $2,000 inspections $10,000 machine hours Per DL$ Per Move Per Machine Hour Applied Overhead = Automated $0.40 $20.00 $40.00 Est. Budgeted Overhead Budgeted Cost Labor Hrs Application Rate (x) $20.00 Machine Use Application Rate (Divide) $60.40 Applied Overhead = Activity Data for Products Manufactored by Com. - GIVEN Activity Data for Products Radio CD Player Direct Labor $120,000.00 $30,000.00 No. of Inspections $500.00 $1,500.00 Machine hours $5,000.00 $5,000.00 Radio Name 3 $60,000 Total Activity Rate $150,000 $0.40 Actual Direct Labor $120,000 Total $48,000.00 10,000 Est. Annual cost $60,000 $40,000 $400,000 Activity Rate - if Given Type here Supervision Inspection Machine Use Total Rate Solve the Activity Rate if Not Given Supervision Application Rate (Divide) Name 3 Activity Rate Direct Labor Total Overhead to Apply Supervision $0.40 $120,000.00 $48,000.00 Inspection $20.00 $500.00 $10,000.00 Machine Use $40.00 $5,000.00 $200,000.00 Total $60.40 $125,500.00 $258,000.00 CD Player Activity Rate Direct Labor Total Overhead to Apply Supervision $0.40 $30,000.00 $12,000.00 Inspection $20.00 $1,500.00 $30,000.00 Machine Use $40.00 $5,000.00 $200,000.00 Total $60.40 $36,500.00 $242,000.00 Name 3 Activity Rate Direct Labor Total Overhead to Apply Supervision $0.40 $$- Inspection $20.00 $$- Machine Use $40.00 $$- Total $60.40 $$- Total Overhead Appiled Direct Labor Direct Materials Total Cost Total Units Produced Cost Per Unit Radio $258,000.00 $120,000.00 $1,500,000.00 $1,878,000.00 20,000 $93.90 CD Player $242,000.00 $30,000.00 $500,000.00 $772,000.00 10,000 $77.20 $$$$$#DIV/0! Application Rate (x) $40.00 Activity Rate if not Given Activity Cost Pool Supervision Inspection Depreciation $- Name 3 Est. Budgeted Overhead Budgeted Cost Labor Hrs Est Cost $0.40 $20.00 $40.00 $60.40 $40,000.00 Total Activity Rate $2,000.00 $20.00 Actual Direct Labor $120,000.00 Total $2,400,000.00 $400,000.00 Total Activity Rate $10,000.00 $40.00 Actual Direct Labor $120,000.00 Est Activity Level DL Cost Inspections Machine Hours Total $4,800,000.00 4 .2 A Cash Receipts Budget 4 .2 A1 30% 50% 20% 100% Feb $80,000.00 $24,000.00 $$$24,000.00 Mar $60,000.00 $18,000.00 $40,000.00 $$58,000.00 Apr $100,000.00 $30,000.00 $30,000.00 $16,000.00 $76,000.00 May $150,000.00 $45,000.00 $50,000.00 $12,000.00 $107,000.00 Jun $180,000.00 $54,000.00 $75,000.00 $20,000.00 $149,000.00 20% 70% 10% 100% May $100,000.00 $20,000.00 $$$20,000.00 June $120,000.00 $24,000.00 $70,000.00 $$94,000.00 July $140,000.00 $28,000.00 $84,000.00 $10,000.00 $122,000.00 August $180,000.00 $36,000.00 $98,000.00 $12,000.00 $146,000.00 September $210,000.00 $42,000.00 $126,000.00 $14,000.00 $182,000.00 50% 30% 20% 100% Collections of Current Month (+) Collections of Sales from Past Month (+) Collections of Sales from 2 Months past (=) Cash for the month May $50,000.00 $25,000.00 $$$25,000.00 June $58,000.00 $29,000.00 $15,000.00 $$44,000.00 July $60,000.00 $30,000.00 $17,400.00 $10,000.00 $57,400.00 August $75,000.00 $37,500.00 $18,000.00 $11,600.00 $67,100.00 September $80,000.00 $40,000.00 $22,500.00 $12,000.00 $74,500.00 Jan $600.00 $180.00 $- Feb $500.00 $150.00 $$150.00 Mar $700.00 $210.00 $$210.00 Example A1 Collections of Current Month (+) Collections of Sales from Past Month (+) Collections of Sales from 2 Months past (=) Cash for the month 4 .2 A Master Formula Collections of Current Month (+) Collections of Sales from Past Month (+) Collections of Sales from 2 Months past (=) Cash for the month 4 .2 B Purchase Budget Expected Sales For the Month (+) Desired Ending Inventory (-) Beginning inventory (=) # Of units needing to be Purchased 30% $$- $$- 30% 4 .2 B Purchase Budget Expected Sales For the Month (+) Desired Ending Inventory (-) Beginning inventory (=) # Of units needing to be Purchased Purchase Price per unit July 10,000.00 2,400.00 2,000.00 10,400.00 $52,000.00 20% 20% $5.00 4 .2 B Purchase Budget Example Expected Sales For the Month (+) Desired Ending Inventory (-) Beginning inventory (=) # Of units needing to be Purchased Purchase Price per unit Units 30% 30% $15.00 4 .2 B Purchase Budget Expected Sales For the Month (+) Desired Ending Inventory (-) Beginning inventory (=) # Of units needing to be Purchased Purchase Price per unit August 12,000.00 3 ,000.00 2,400.00 12,600.00 $63,000.00 Apr 25,000.00 9,000.00 7,500.00 26,500.00 $397,500.00 Units May 30,000.00 9,900.00 9,000.00 3 0,900.00 $463,500.00 Jun 33,000.00 10,500.00 9,900.00 3 3,600.00 $504,000.00 Jan 6 00.00 150.00 180.00 570.00 $2,850.00 Feb 500.00 210.00 150.00 560.00 $2,800.00 July Units 30% 180.00 180.00 $900.00 30% $5.00 4 .2 C Cash Disbursemetn June July Purchases 3 0% Advertising 70% Commissions 100% Rent Utilities Wages $70,000 June ` (+) Payment of Purchase from Month B4 Curr. Mnt (+) Payment of Exepenses in Month incurred in Current Months (=) Cash Disbursemetn for the month $80,000 $5,000 $4,000 $9,000 $2,000 $12,000 July 30% 70% 10,500.00 24,500.00 $367,500.00 Mar 700.00 210.00 4 90.00 $2,450.00 June Purchases Advertising Commissions Rent Utilities Wages $24,000 $49,000 $32,000 $105,000 July June $12,000 $800 $1,000 $700 $300 $2,400 July $3,000.00 $3,600.00 $7,000.00 $5,200.00 $15,800.00 $90,000 $5,000 $5,000 $9,000 $3,000 $12,000 Sept $30,000 $56,000 $38,500 $124,500 August $10,000.00 30% 70% August Sept $100,000 $6,000 $7,000 $9,000 $2,500 $14,000 August $21,000 Jun 4.2 C Cash Disbursement Test 1 Payments of Current Month Purchase (+) Payment of Purchase from Month B4 Curr. Mnt (+) Payment of Exepenses in Month incurred in Current Months (=) Cash Disbursemetn for the month $Jul 35,000.00 September October November December $12,000.00 $16,000.00 $28,000.00 $20,000.00 $18,000.00 $24,000.00 $42,000.00 $19,000.00 $23,000.00 $22,000.00 $53,000.00 $75,000.00 $84,000.00 40% 60% 4 .2 C Cash Disbursemetn Example Cash Paid in Munth Purchase is Cash Paid in Month Following pur October 3 ,000.00 12,000.00 $60,000.00 September October November December $30,000.00 $40,000.00 $70,000.00 $50,000.00 $2,000.00 $4,000.00 $2,000.00 $3,000.00 $2,000.00 $4,000.00 $5,000.00 $5,000.00 $5,000.00 $1,000.00 $2,000.00 $2,000.00 $8,000.00 $10,000.00 $9,000.00 Purchases Advertising Commissions Rent Utilities Wages Payments of Current Month Purchase (+) Payment of Purchase from Month B4 Curr. Mnt (+) Payment of Exepenses in Month incurred in Current Months (=) Cash Disbursemetn for the month September 15,000.00 $16,000 $900 $1,800 $700 $300 $2,700 $27,000 $70,000 $34,000 $131,000 September $15,000 $800 $1,600 $700 $300 $3,100 August September $4,800.00 $4,500.00 $8,400.00 $11,200.00 $6,400.00 $6,500.00 $19,600.00 $22,200.00 4 .2 D Cash Budget Cash Collecting from Sales (-) Less Cash Disbursement for Inventory Purchases (-) Less Cash Disbursement for Other Expences (=) Change In Cash Balance During the period due to operations (+) Add Beginning Cash Balance (-) Less Desired Ending Cash Balance (=) Amount Needed to borrow July Sales Inventory Purchases Operating Expenses Purchases of Equipment Payment of dividends $200,000 $80,000 $25,000 $50,000 $5,000 I nventory Purchases Disbursement Desired Cash Cash Collecting from Sales (-) Less Cash Disbursement for Inventory Purchases (-) Less Cash Disbursement for Other Expences (=) Change In Cash Balance During the period due to operations (+) Add Beginning Cash Balance (-) Less Desired Ending Cash Balance (=) Amount Needed to borrow 6 0% 30% 10% 100% August September $180,000 $230,000 $140,000 $150,000 $20,000 $40,000 $60,000 $20,000 $10,000 $15,000 $80,000.00 $70,000.00 $140,000.00 $75,000.00 $10,000.00 August $180,000.00 $108,000.00 $60,000.00 $$168,000.00 $80,000.00 $70,000.00 $18,000.00 $- September $230,000.00 $138,000.00 $54,000.00 $20,000.00 $212,000.00 $140,000.00 $75,000.00 $(3,000.00) $$10,000.00 $(13,000.00) $55,000.00 $$$$- July $200,000.00 $120,000.00 $$$120,000.00 $18,000.00 $150,000.00 $$69,000.00 $18,000.00 $87,000.00 $150,000.00 $$(63,000.00) $$(63,000.00) 4.2D Example Cash Collecting from Sales (-) Less Cash Disbursement for Inventory Purchases (-) Less Cash Disbursement for Other Expences (=) Change In Cash Balance During the period due to operations (+) Add Beginning Cash Balance (-) Less Desired Ending Cash Balance (=) Amount Needed to borrow Cash Collecting from Sales (-) Less Cash Disbursement for Inventory Purchases (-) Less Cash Disbursement for Other Expences (=) Change In Cash Balance During the period due to operations (+) Add Beginning Cash Balance (-) Less Desired Ending Cash Balance (=) Amount Needed to borrow April May June $290,000.00 $310,000.00 $300,000.00 $140,000.00 $160,000.00 $130,000.00 $32,000.00 $38,000.00 $34,000.00 $72,000.00 $50,000.00 $120,000.00 $10,000.00 $8,000.00 $19,000.00 Sales I nventory Purchases Operating Expenses Purchases of Equipment Payment of dividends I nventory Purchases Disbursement Desired Cash 70% 25% 5% 100% $114,000.00 $$$$- $140,000.00 $96,000.00 $160,000.00 $173,000.00 $20,000.00 $130,000.00 April May June $290,000.00 $310,000.00 $300,000.00 $203,000.00 $217,000.00 $210,000.00 $$72,500.00 $77,500.00 $$$14,500.00 $203,000.00 $289,500.00 $302,000.00 $160,000.00 $173,000.00 $(31,000.00) $$20,000.00 $(51,000.00) $$75,000.00 $15,500.00 $90,500.00 4.2 E Budgeting Cash Accounts Receivable I nventory Buildings and equipment Total Assets $50,000 $25,000 Estimated $10,000 $125,000 $210,000 Total Accounts Payable Notes Payable Common Stock Retained Earnings Total Liabilities + Owner's Equity $30,000 Acct/Rec $90,000 Purchases $40,000 $50,000 $210,000 Total Beginning Inventpry (+) Purchases (-) Ending Inventory (=) Cost of Good Sold Budgeted Net Income Sales (-) Cost of Goods Sold (=) Gross Margin (-) Other Expenses (=) Net Income Correct Answer Sales March 6 0% 4 0% $$March 30% 70% $$- April May June $300,000.00 $180,000.00 $$$120,000.00 $180,000.00 $120,000.00 $$$- April May June $160,000.00 $48,000.00 $$$112,000.00 $48,000.00 $112,000.00 $$$- $10,000 Budgeted End Inv March April May $160,000.00 Ending Inventory $22,000.00 $22,000.00 $148,000.00 Selling and Admin Expense $11,000.00 Depreciation $3,000.00 Interest On Note $5,000.00 $300,000.00 Total Exp Err:522 $19,000.00 $148,000.00 $152,000.00 New Equipment $5,000.00 $19,000.00 Borrorow (New Loan) $10,000.00 $133,000.00 $137,200.00 June Err:522 Err:522 Example Cash Accounts Receivable I nventory Buildings and equipment Total Assets $10,000 $40,000 $25,000 $240,000 $315,000 Total Sales Estimated Accounts Payable Notes Payable Common Stock Retained Earnings Total Liabilities + Owner's Equity $63,000 $87,000 $50,000 $115,000 $315,000 Total Acct/Rec Purchases Beginning Inventpry (+) Purchases (-) Ending Inventory (=) Cost of Good Sold Budgeted Net Income Sales (-) Cost of Goods Sold (=) Gross Margin (-) Other Expenses (=) Net Income March Sales Estimated Accounts Payable Notes Payable Common Stock Retained Earnings Total Liabilities + Owner's Equity $30,000 $90,000 $40,000 $50,000 $210,000 Total Acct/Rec Purchases Budgeted Net Income May $- May 30% 70% $$- $10,000 Budgeted End Inv May $160,000.00 Ending Inventory $22,000.00 $148,000.00 Selling and Admin Expense Depreciation Interest On Note $300,000.00 Total Exp $148,000.00 $152,000.00 New Equipment $14,800.00 Borrorow (New Loan) $137,200.00 Sales Estimated Accounts Payable Notes Payable Common Stock Retained Earnings Total Liabilities + Owner's Equity $63,000 $87,000 $50,000 $115,000 $315,000 Total Acct/Rec Purchases Budgeted Net Income $$$- $- $10,000 $40,000 $25,000 $240,000 $315,000 Total Sales (-) Cost of Goods Sold (=) Gross Margin (-) Other Expenses (=) Net Income $- 6 0% 4 0% 4 .2F Budgeted Balance Sheet Example Cash Accounts Receivable I nventory Buildings and equipment Total Assets Beginning Inventpry (+) Purchases (-) Ending Inventory (=) Cost of Good Sold $$$- April May June $120,000.00 $24,000.00 $$$96,000.00 $24,000.00 $96,000.00 March 20% 8 0% $50,000 $25,000 $10,000 $125,000 $210,000 Total Sales (-) Cost of Goods Sold (=) Gross Margin (-) Other Expenses (=) Net Income April May June $200,000.00 $80,000.00 $$$120,000.00 $80,000.00 $120,000.00 $25,000 Budgeted End Inv March April May $120,000.00 Ending Inventory $36,000.00 $36,000.00 $109,000.00 Selling and Admin Expense $15,000.00 Depreciation $5,000.00 Interest On Note $1,300.00 $200,000.00 Total Exp Err:522 $21,300.00 $109,000.00 $91,000.00 New Equipment $10,000.00 $21,300.00 Borrorow (New Loan) $9,000.00 $69,700.00 4 .2F Budgeted Balance Sheet Cash Accounts Receivable I nventory Buildings and equipment Total Assets Beginning Inventpry (+) Purchases (-) Ending Inventory (=) Cost of Good Sold $- 4 0% 6 0% June Err:522 Err:522 June July August $300,000.00 $180,000.00 $$$120,000.00 $180,000.00 $120,000.00 $$$- June July August $160,000.00 $48,000.00 $$$112,000.00 $48,000.00 $112,000.00 $$$- June July August $22,000.00 $11,000.00 $3,000.00 $800.00 $14,800.00 Err:522 Err:522 $5,000.00 $10,000.00 March 4 0% 6 0% $$March 20% 8 0% $$- April May June $200,000.00 $80,000.00 $$$120,000.00 $80,000.00 $120,000.00 $$$- April May June $120,000.00 $24,000.00 $$$96,000.00 $24,000.00 $96,000.00 $$$- $25,000 Budgeted End Inv March April May $120,000.00 Ending Inventory $36,000.00 $36,000.00 $109,000.00 Selling and Admin Expense $15,000.00 Depreciation $5,000.00 Interest On Note $1,300.00 $200,000.00 Total Exp Err:522 $21,300.00 $109,000.00 $91,000.00 New Equipment $10,000.00 $21,300.00 Borrorow (New Loan) $9,000.00 $69,700.00 June Err:522 Err:522 4 .2 Test 1 Q4 Cash Collecting from Sales (-) Less Cash Disbursement for Inventory Purchases (-) Less Cash Disbursement for Other Expences (=) Change In Cash Balance During the period due to operations (+) Add Beginning Cash Balance (-) Less Desired Ending Cash Balance (=) Amount Needed to borrow October Sales Inventory Purchases Operating Expenses Purchases of Equipment Payment of dividends I nventory Purchases Disbursement Desired Cash Sept Cash Collecting from Sales (-) Less Cash Disbursement for Inventory Purchases (-) Less Cash Disbursement for Other Expences (=) Change In Cash Balance During the period due to operations (+) Add Beginning Cash Balance (-) Less Desired Ending Cash Balance (=) Amount Needed to borrow 8 0% 15% 5% 100% $88,000.00 $70,400.00 $$$70,400.00 $92,000 $69,000 $20,000 $10,000 $3,000 $13,000.00 October $92,000.00 $73,600.00 $13,200.00 $$86,800.00 November December $97,000 $105,000 $75,000 $80,000 $25,000 $27,000 $5,000 $12,000 $3,000 $3,000 $69,000.00 $8,000.00 $75,000.00 $42,000.00 $5,000.00 November $97,000.00 $77,600.00 $13,800.00 $4,400.00 $95,800.00 $69,000.00 $8,000.00 $18,800.00 $- December $105,000.00 $84,000.00 $14,550.00 $4,600.00 $103,150.00 $75,000.00 $42,000.00 $(13,850.00) $$5,000.00 $(18,850.00) $18,800.00 $80,000.00 $$15,750.00 $4,850.00 $20,600.00 $80,000.00 $$(59,400.00) $$(59,400.00) Midterm Q1 Sales Purchases of raw materials Direct labor Manufacturing overhead Administrative expenses Selling expenses Raw materials inventory, beginning Raw materials inventory, ending Work in process inventory, beginning Work in process inventory, ending Finished goods inventory, beginning Finished goods inventory, ending Midterm Q2 $950.00 $170.00 $210.00 $200.00 $180.00 $140.00 $70.00 $80.00 $30.00 $20.00 $100.00 $70.00 Schedule of Cost of Goods Manufactured statement. Midterm Q1 Direct Materials (DM) = Direct Labor (DL) = Overhead (OH) = Total Manufactured Cost = $160 $210 $200 $570 Beginning Raw Materials Inventory (+) Purchases Raw Materials Avail for Use (-) End Raw Materials Inv. (=) Raw Materials Used In Prod. $70 $170 $240 $80 $160 Sales Revenue (-) Cost of Goods Sold (Product Cost) (CGM) (=) Gross Margin (CGM) $950 $580 $370 Beginning Work in Progress Inventory (+) Current Month Manufactured T otal Manufactured Cost (-) End Work In Progress (=) Cost of Goods (Manufactured) (CGM) $30 $570 $600 $20 $580 Sales Revenue (=) Cost of Goods Sold (CGM&S) (=) Gross Margin (-) Period Cost Selling Cost General and Admin Cost (=) Net Operating Cost/Income $950 $610 $340 Beginning Finished Goods Inventory (+) Cost of Goods Manufactured Goods Available for Sale (-) End Finished Goods Inventory (=) Cost of Goods Sold (CGM&S) $100 $580 $680 $70 $610 (=) Cost of Goods Sold (CGM&S) (=) Gross Margin (=) Net Operating Income $610 $340 $20 $140 $180 $20 Midterm Q3 S1: Units to Account For: Beginning WIP Inventory (+) Units Started (=) Units to Account For Units 275,000 60,000 335,000 Percentage Completed Direct Materials 65% Conversion (DL+OH) 45% Units (Step 1 & 2 Must Match) S: Units 280,000 55,000 335,000 Percentage Completed Direct Materials 75% Conversion (DL+OH) 65% Units (Step 1 & 2 Must Match) Account for Them Completed & Shipped Out WIP Ending Inventory (=) Units to Account For S3: Equivalent Units Completed & Shipped Out WIP Ending Inventory (=) Units to Account For Direct Materials 280,000 41,250 321,250 Conversion (DL+OH) 280,000 35,750 315,750 Mid-Term Q4 Revenues (-) Vararible Cost Direct Materials Direct Labor Variable Manufacturing Overhead Variable Selling & Admin (=) Total Var Cost Contribution Margin Variable Costing w/o Var. Selling & Admin) (-) Fixed Cost Fixed Manufacturing Overhead Fixed Selling and Administrative (=) Total Fixed Cost (=) Net Income Today $924,000 Per Unit $4.20 Increase by 5% $970,200.00 $462,000.00 $- $$$311,850.00 $173,250.00 $$485,100.00 $485,100.00 $- $$$297,000.00 $165,000.00 $462,000.00 $462,000.00 $280,000.00 $82,000.00 $362,000 $100,000 $280,000.00 $82,000.00 $362,000 $123,100 Contribution Margin Ratio divided by Total Sales = CM Ratio Percent 50.00% Contribution Margin Ratio Per Unit Fixed cost (diveded by) Contribution Margin per Unit Breakeven Point Cost Per Unit Company Name Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling & Admin Fixed Selling and Administrative Units Produced Units in beginnning finished goods Units Sold Sales Rev Selling Price 362,000.00 $462,000.00 0.78 $0.78 $$$297,000.00 $280,000.00 $165,000.00 $82,000.00 220,000 per unit per unit per unit per month per unit per month per month 220,000 924,000 $4.20 per unit Total $336,000 Revenues (-) Vararible Cost Direct Materials Direct Labor Variable Manufacturing Overhead Variable Selling & Admin Per Unit $112 $13.00 $49.00 $6.00 $10.00 (=) Total Var Cost Contribution Margin V ariable Costing w/o Var. Selling & Admin) (-) Fixed Cost Fixed Manufacturing Overhead Fixed Selling and Administrative (=) Total Fixed Cost (=) Net Income $234,000.00 $102,000.00 CM/Unit Percent $80,600.00 $15,000.00 $95,600 $6,400 Finding Net Operating Income Variable Style) Sales Less Variable Expenses Beginning Inventory $100.00 V ar. COGS $204,000.00 V ar. Selling & Admin $30,000.00 Contribution Margin Less Ending Inventory Fixed Manufacturing Overhead Fixed Selling and administrative Net Operating Income $78.00 $34.00 $68.00 30.36% $336,000.00 $234,000.00 $102,000.00 $80,600.00 $15,000.00 $6,400.00 Changes of the two Systems Variable Net Oper. Income $6,400.00 Absorbtion Net Oper. Income $(6,100.00) Difference $12,500.00 Company Name Direct Materials $13.00 Direct Labor $49.00 Variable Manufacturing Overhead $6.00 Fixed Manufacturing Overhead $80,600.00 Variable Selling & Admin $10.00 Fixed Selling and Administrative $15,000.00 Units Produced 2,600 Units in beginnning finished goods 100.00 Units Sold 3,000 Selling Price $112.00 per unit per unit per unit per month per unit per month per month per unit Finding Net Operating Income (Absorbtion Style) Sales $336,000.00 Less Variable Expenses Beginning Inventory $100.00 COGM $257,400.00 Goods Avail For Sale $257,500.00 Less Ending Inventory $(39,600.00) $297,100.00 Gross Margin $38,900.00 Selling and Admin Expenses $45,000.00 Net Operating Income $(6,100.00) A bsortion Cost - Per Unit Fixed Manufacturing Overhead Units Produced Absortion Cost - Per Unit Unit Product Cost Direct Materials Direct Labor Variable Manufacturing Overhead (+) Total Variable Cost (+) Absorbtion Cost (=) Unit Product Cost $80,600.00 2,600 $31.00 $13.00 $49.00 $6.00 $68.00 $31.00 $99.00 Cost Problem Final Answers Use for Formula Actual Price = AR Actual Qty Purch = AH Standard Price = SR Standard Quantity - Calc.. SH Actual Production DL Hrs per Unit Price #DIV/0! $0.00 $$- Use to Solve if not Given All Answers Actual Price Actual Qty Standrd Price - FOH App Rate Standard Qty - Calc.. AQU - Price #DIV/0! #NAME? Actual Quantiy purchased*Actual Price Given Answer Actual Result #DIV/0! Difference of Act vs Flex FOH Budget Variance #DIV/0! Favor Unit DLH DLH Labor Machine Hours Variable Overhead Application Unit .38lbs 85,000.00 80,000.00 0.40 85000 lbs AQ SP $0.00 #DIV/0! TOTAL #DIV/0! Neg = Favorable Pos = Unfav (AQ- SQ) $0.00 TOTAL $0.00 Neg = Favorable Pos = Unfav - Actual Qty Purchased X (Actual Price -Standard Price) Actual Qty Purchased (*) (Actula Price (-) Standard Price) #DIV/0! $0.00 Neg = Favorable Materials Purchased Total Cost of Materials Purchased $0.00 Direct Material Price Varience #DIV/0! Pos = Unfav Per Unit Cost of DM #DIV/0! Units Units Materials Purchased Total Cost of Materials Purchased Materials Used $0.00 Pos = Unfav Standard Quantiy $0.00 pounds pounds #DIV/0! Pos = Unfav Actual DL Cost #DIV/0! Hours Direct Labor Effciency Varience $0.00 Pos = Unfav Standard DL Hours $0.00 Variable Overhead Price Variance #DIV/0! Pos = Unfav FOH App Rate Fixed Overhead Expense ( Budget Varience) $0.00 Pos = Unfav Cost Problem Final Answers Use for Formula Actual Price = AR Actual Qty Purch = AH Standard Price = SR Standard Quantity - Calc.. SH Actual Production DL Hrs per Unit Price #DIV/0! $0.00 $$- Use to Solve if not Given All Answers Actual Price Actual Qty Standrd Price - FOH App Rate Standard Qty - Calc.. AQU - Price #DIV/0! #NAME? Actual Quantiy purchased*Actual Price Given Answer Actual Result #DIV/0! Difference of Act vs Flex FOH Budget Variance #DIV/0! Favor Unit DLH DLH Unit .38lbs 85,000.00 80,000.00 0.40 85000 lbs AQ Labor Machine Hours Variable Overhead Application Materials Purchased Total Cost of Materials Purchased Materials Used Machine Hours Used Machine Hours Budgeted for Period DL Hours Used Actual DL Cost DL Hours Budgeted for Period Total Variable Manafacturing Overhead Actual Fixed Manufacturing OH Total Budgeted Fixed Variable Overhead Actual Manufacturing OH Units Units 85,000.00 $32,300.00 Pos = Favorable Neg = Unfavable #DIV/0! SQ*SP Standard $0.00 Difference in Flex vs Stand Type of Variance Neg = Fav $0.00 Pos = Unfav Unfavor Neg = Favorable Pos = Unfavorable TOTAL #DIV/0! Neg = Favorable Pos = Unfav (AQ- SQ) $0.00 TOTAL $0.00 Neg = Favorable Pos = Unfav - Direct Material Price Varience $32,300.00 Pos = Unfav Per Unit Cost of DM $0.3800000 $0.00 Pos = Unfav Standard Quantiy $0.00 pounds pounds Machine Hours Machine Hours Hours Actual Fixed Overhead - Budgeted Fixed Overhead Actual Fixed Overhead Budgeted Fixed Overhead $0.00 $0.00 Neg = Favorable SP) $0.00 Direct Material Quanty Varience Budgeted and Actual Information Planned Production Actual Production Actual Allocation Units * (Actual Rate-Standard Rate) Actual Allocation Units Actual Rate Standard Rate $0.00 #DIV/0! $0.00 Neg = Favorable Budgeted Variable OH $0.00 #DIV/0! Budgeted Allocation Activity Units $0.00 (denominator) (AP#DIV/0! SP $0.00 Standard Price per DL Hour X (Actual DL Hours - Standand DL Hours) $$ Per DL Hr DL Hours Used Standard DL Hours $$0.00 Neg = Favorable DL Hrs per Unit Actual Production $- W rite All Numbers in absolute form (positive) AQp*SP $0.00 Flexible Budget $0.00 Total DM Variance Standand Price and Quanities pounds per unit per pound DL Hrs per Unit per DL Hr Hours per unit per DL Hr Materials Standard Price X (Actual Quanity Used - Standand Quanty (-) Standard Price) Actual Quantity Used Standard Quanity $0.00 $0.00 Neg = Favorable DM Per Unit Actual Production 0 Actual Quantity DL Hours X (Actual Rate -Standard Rate DL Hours Used Actual DL Cost Standard Rate #DIV/0! $Neg = Favorable DL Hours Used Actual DL Cost $- Direct Labor Rate Varience Machine Hours Machine Hours Hours Standard $0.00 Difference in Flex vs Stand Type of Variance Neg = Fav $0.00 Pos = Unfav Unfavor Neg = Favorable Pos = Unfavorable SP) $0.00 Direct Material Quanty Varience Planned Production Actual Production SQ*SP (AP#DIV/0! - Budgeted and Actual Information Machine Hours Used Machine Hours Budgeted for Period DL Hours Used Actual DL Cost DL Hours Budgeted for Period Total Variable Manafacturing Overhead Actual Fixed Manufacturing OH Total Budgeted Fixed Overhead Actual Variable Manufacturing OH Pos = Favorable Neg = Unfavable Total DM Variance Standand Price and Quanities pounds per unit per pound DL Hrs per Unit per DL Hr Hours per unit per DL Hr Materials W rite All Numbers in absolute form (positive) AQp*SP $0.00 Flexible Budget $0.00 Direct Labor Rate Varience #DIV/0! Pos = Unfav Actual DL Cost #DIV/0! Actual Qty Purchased X (Actual Price -Standard Price) Actual Qty Purchased (*) (Actual Price (-) Standard Price) 85,000 $0.38 $0.00 Neg = Favorable Materials Purchased Total Cost of Materials Purchased 85,000 $32,300.00 Standard Price X (Actual Quanity Used - Standand Quanty (-) Standard Price) Actual Quantity Used Standard Quanity $0.00 $0.00 Neg = Favorable DM Per Unit Actual Production 0 Actual Quantity DL Hours X (Actual Rate -Standard Rate DL Hours Used Actual DL Cost Standard Rate #DIV/0! $Neg = Favorable DL Hours Used Actual DL Cost $- Hours Direct Labor Effciency Varience $0.00 Pos = Unfav Standard DL Hours $0.00 Variable Overhead Price Variance #DIV/0! Pos = Unfav FOH App Rate Fixed Overhead Expense ( Budget Varience) $0.00 Pos = Unfav Standard Price per DL Hour X (Actual DL Hours - Standand DL Hours) $$ Per DL Hr DL Hours Used Standard DL Hours $$0.00 Neg = Favorable DL Hrs per Unit Actual Production $Actual Allocation Units * (Actual Rate-Standard Rate) Actual Allocation Units Actual Rate Standard Rate $0.00 #DIV/0! $0.00 Neg = Favorable Budgeted Variable OH $0.00 #DIV/0! Budgeted Allocation Activity Units $0.00 (denominator) Actual Fixed Overhead - Budgeted Fixed Overhead Actual Fixed Overhead Budgeted Fixed Overhead $0.00 $0.00 Neg = Favorable Contribution Margin per Product Line / Total NOI Segment Contribution Margin Income Statement Example Data Given Values Product A $10.00 $4.00 $110,000.00 35,000 Selling price per product Variable expenses per product Traceable fixed expenses per year in TOTAL Sales Volume in units Product B $20.00 $15.00 $35,000.00 20,000 Annual common fixed expenses $100,000.00 (Used in Total) Calculated values Total Selling price per product T otal Variable expenses per product Traceable fixed expenses per year per UNIT $350,000.00 $140,000.00 $3.14 Product B $18.00 $12.00 $50,000.00 25,000 eq eq eq Product A $350,000.00 $140,000.00 $210,000.00 $110,000.00 $100,000.00 Product B $400,000.00 $300,000.00 $100,000.00 $35,000.00 $65,000.00 Total $750,000.00 $440,000.00 $310,000.00 $145,000.00 $165,000.00 $100,000.00 $65,000.00 Product B $450,000.00 $300,000.00 $150,000.00 $50,000.00 $100,000.00 Total $810,000.00 $540,000.00 $270,000.00 $130,000.00 $140,000.00 $100,000.00 $40,000.00 $400,000.00 $300,000.00 $1.75 Product A $12.00 $8.00 $80,000.00 30,000 Sales Variable Expenses Contribution Margin T raceable Fixed Expenses Segment Contribution Margin Common Fixed Expenses T otal Net Operating Income Contribution Margin per Product Line / Total NOI Segment Contribution Margin Income Statement Given Values Selling price per product Variable expenses per product Traceable fixed expenses per year in TOTAL Sales Volume in units Annual common fixed expenses $100,000.00 (Used in Total) Calculated values Total Selling price per product T otal Variable expenses per product Traceable fixed expenses per year per UNIT $360,000.00 $240,000.00 $2.67 Sales Variable Expenses Contribution Margin T raceable Fixed Expenses Product Line Contribution Margin Common Fixed Expenses T otal Net Operating Income eq eq eq Product A $360,000.00 $240,000.00 $120,000.00 $80,000.00 $40,000.00 $450,000.00 $300,000.00 $2.00 ROI ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Segment Contribution Margin Income Statement Example Data Given Values Product A Selling price per product Variable expenses per product Traceable fixed expenses per year in TOTAL Sales Volume in units Margin NOI Sales Margin div eq $3,000,000.00 $15,000,000.00 0.2000 div eq $15,000,000.00 $30,000,000.00 0.5000 30,000 T urnover Annual common fixed expenses Average Operating Assets NOI $30,000,000.00 (Given) $3,000,000.00 (Given) Sales Average Operating Assets Turnover Calculated values Total Selling price per product (Total Sales) T otal Variable expenses per product Traceable fixed expenses per year per UNIT $15,000,000.00 (Given) $0.00 $0.00 Margin T urnover ROI Return on Investment (ROI) 0.2000 0.5000 0.1000 * eq ROI ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Segment Contribution Margin Income Statement Example Data Given Values Product A Selling price per product Variable expenses per product Traceable fixed expenses per year in TOTAL Sales Volume in units Margin NOI Sales Margin div eq $3,000,000.00 $10,000,000.00 0.3000 div eq $10,000,000.00 $20,000,000.00 0.5000 30,000 T urnover Annual common fixed expenses Average Operating Assets NOI $20,000,000.00 (Given) $3,000,000.00 (Given) Sales Average Operating Assets Turnover Calculated values Total Selling price per product (Total Sales) T otal Variable expenses per product Traceable fixed expenses per year per UNIT $10,000,000.00 (Given) $0.00 $0.00 Margin T urnover ROI Return on Investment (ROI) 0.3000 0.5000 0.1500 * eq Residual Income ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values NOI Average Operating Assets Minimum REQUIRED Rate of Return $2,000,000.00 $12,000,000.00 15% Minimum Required Return T otal Selling price per product (Total Sales) $10,000,000.00 Average Operating Assets Minimum Required Rate of Return Minimum Required Return Net Operating Income Minimum Required Return Residual Income $12,000,000.00 * 15% eq $1,800,000.00 Residual Income $2,000,000.00 $1,800,000.00 eq $200,000.00 Residual Income ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values Minimum Required Return NOI Average Operating Assets Minimum REQUIRED Rate of Return $2,200,000.00 $15,000,000.00 12% Average Operating Assets Minimum Required Rate of Return Minimum Required Return T otal Selling price per product (Total Sales) Net Operating Income Minimum Required Return Residual Income $15,000,000.00 * 12% eq $1,800,000.00 Residual Income $2,200,000.00 $1,800,000.00 eq $400,000.00 Managing Constraints Exercise 6.c.1 ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values Total Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Outdoor $4,800,000 1,800,000 3 ,000,000 2,800,000 $200,000 Sunk or allocated costs T he Outdoor Department's sales Indoor $1,200,000 4 00,000 800,000 1,000,000 $(200,000) Total Diff $3,600,000 1,400,000 2,200,000 1,800,000 $400,000 Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Total Outdoor $(1,560,000) (540,000) (1,020,000) (600,000) $ (420,000) $3,240,000 1,260,000 1,980,000 2,200,000 $(220,000) $400,000.00 $(400,000) Indoor Diff $3,240,000 1,260,000 1,980,000 1,800,000 $180,000 $(360,000) (140,000) (220,000) $(220,000) $400,000.00 10% NOI effect of loosing the Outdoor Dept? Decision based on whether fixed cost savings in dropping the unit exceed the contribution margin produced Calculated Values Managing Constraints ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values Total Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Outdoor $5,700,000.00 $2,200,000.00 $3,500,000.00 $3,200,000.00 $300,000.00 Sunk or allocated costs T he Outdoor Dept's inpact on Indoor Sales Indoor $1,500,000.00 $500,000.00 $1,000,000.00 $1,300,000.00 $(300,000.00) Total Diff $4,200,000.00 $1,700,000.00 $2,500,000.00 $1,900,000.00 $600,000.00 Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Total $(2,004,000.00) $(704,000.00) $(1,300,000.00) $(1,000,000.00) $ (300,000.00) Outdoor $3,696,000.00 $1,496,000.00 $2,200,000.00 $2,200,000.00 $- $$300,000.00 $(300,000.00) Indoor $3,696,000.00 $1,496,000.00 $2,200,000.00 $1,900,000.00 $300,000.00 Diff $(504,000.00) $(204,000.00) $(300,000.00) $$(300,000.00) $300,000.00 12% NOI effect of loosing the Outdoor Dept? Decision based on whether fixed cost savings in dropping the unit exceed the contribution margin produced Managing Constraints Make vs Buy Part 1 Part 2 Make Buy DM DL VOH FOH (Trace) FOH (Allocated) Purchase Price $5.00 $3.00 $0.50 $3.00 $2.25 $0.00 $13.75 ($2.00) Gain/Loss ($2.00) 60,000 ($120,000.00) $0.00 ($120,000.00) $0.00 $0.00 $0.00 $1.50 $2.25 $ 12.00 $15.75 $2.00 Units Produced Other allocations Make a one time sale or not 10K levels Unit Cost Normal Sale Normal Costs Profit/Loss $18.00 $13.50 $4.50 12,000 12,000 12,000 Total $216,000.00 $162,000.00 $54,000.00 Onetime Sale Onetime Costs Profit/Loss $14.00 $8.50 $5.50 Units 2,000 2,000 2,000 $28,000.00 $17,000.00 $11,000.00 10k Level 2k Normal Costs One Time Costs (if original fixed OH is $0) $3.00 $3.00 $2.50 $2.50 $1.00 $1.00 $4.00 $0.00 $2.00 $2.00 $1.00 $0.00 $13.50 $8.50 DM DL VOH FOH VSales&Admin FSales&Admin Added processing for profitability or not Whole Pig Split Point Added Processing New Sales Bacon $100,000 Smoked ($30,000) $140,000 $10,000 Added processing will INCREASED net profits Pork Chops $150,000 Cooked ($20,000) $158,000 ($12,000) Added processing will reduce net profits Pigs Feet $10,000 Pickling ($5,000) $25,000 $10,000 Added processing will INCREASED net profits Split Point Added Processing New Sales X $100,000 Smoked ($70,000) $180,000 $10,000 Y $180,000 Cooked ($80,000) $250,000 ($10,000) Z $120,000 Pickling ($24,000) $150,000 $6,000 Added processing for profitability or not Nationwide Mgf Co. Split off products Profit/ (Loss) Yes/(No) Profit/ (Loss) Yes/(No) Week 6 Quiz ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values Product A Margin Selling price per product Variable expenses per product Traceable fixed expenses per year in TOTAL Sales Volume in units NOI Sales Margin div eq $3,000,000.00 $15,000,000.00 0.2000 div eq $15,000,000.00 $30,000,000.00 0.5000 Turnover Annual common fixed expenses Average Operating Assets NOI $30,000,000.00 (Given) $3,000,000.00 (Given) Sales Average Operating Assets Turnover Calculated values Total Selling price per product (Total Sales) T otal Variable expenses per product Traceable fixed expenses per year per UNIT $15,000,000.00 (Given) $0.00 #DIV/0! Margin T urnover ROI Return on Investment (ROI) 0.2000 0.5000 0.1000 * eq Residual Income Segment Contribution Margin Income Statement Example Data Given Values Minimum Required Return NOI Average Operating Assets Minimum REQUIRED Rate of Return $2,000,000.00 $12,000,000.00 15% T otal Selling price per product (Total Sales) $10,000,000.00 Average Operating Assets Minimum Required Rate of Return Minimum Required Return Net Operating Income Minimum Required Return Residual Income $12,000,000.00 * 15% eq $1,800,000.00 Residual Income $2,000,000.00 $1,800,000.00 eq $200,000.00 Managing Constraints ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values Total Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Outdoor $4,800,000.00 $2,000,000.00 $2,800,000.00 $2,400,000.00 $400,000.00 Sunk or allocated costs T he Outdoor Dept's inpact on Indoor Sales Indoor $1,600,000.00 $800,000.00 $800,000.00 $900,000.00 $(100,000.00) Total Diff $3,200,000.00 $1,200,000.00 $2,000,000.00 $1,500,000.00 $500,000.00 Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Total $(1,920,000.00) $(920,000.00) $(1,000,000.00) $(400,000.00) $ (600,000.00) Outdoor $2,880,000.00 $1,080,000.00 $1,800,000.00 $2,000,000.00 $(200,000.00) $$500,000.00 $(500,000.00) Indoor $2,880,000.00 $1,080,000.00 $1,800,000.00 $1,500,000.00 $300,000.00 Diff $(320,000.00) $(120,000.00) $(200,000.00) $$(200,000.00) $500,000.00 10% Managing Constraints Make vs Buy Part 1 Part 2 Make Buy DM DL VOH FOH (Trace) FOH (Allocated) Purchase Price $4.00 $3.00 $1.00 $3.00 $2.50 $0.00 $13.50 ($0.50) Gain/Loss ($0.50) 5 0,000 ($25,000.00) $0.00 ($25,000.00) $0.00 $0.00 $0.00 $1.50 $2.50 $ 10.00 $14.00 $0.50 Units Produced Other allocations Make a one time sale or not 10K levels Unit Cost Normal Sale Normal Costs Profit/Loss $16.00 $13.50 $2.50 12,000 12,000 12,000 Total $192,000.00 $162,000.00 $30,000.00 Onetime Sale Onetime Costs Profit/Loss $13.00 $9.50 $3.50 Units 2,000 2,000 2,000 $26,000.00 $19,000.00 $7,000.00 12k Level 2k Normal Costs One Time Costs (if original fixed OH is $0) $2.50 $2.50 $3.00 $3.00 $1.50 $1.50 $3.50 $0.00 $2.50 $2.50 $0.50 $0.00 $13.50 $9.50 DM DL VOH FOH VSales&Admin FSales&Admin Added processing for profitability or not Nationwide Mgf Co. Split off products Profit/ (Loss) Yes/(No) Split Point Added Processing New Sales $140,000 Smoked ($60,000) $210,000 $10,000 Y $200,000 Cooked ($55,000) $270,000 $15,000 Z $130,000 Pickling ($20,000) $135,000 ($15,000) X Test 2 Managing Constraints ROI = margin * turnover Margin = NOI/sales Turnover = Sales/average operating assets Minimum Required Return = Avg Op Assets * Minimum REQUIRED Rate of Return Residual Income = NOI - Minimum Required Return Segment Contribution Margin Income Statement Example Data Given Values Total Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) Outdoor $4,900,000.00 $2,200,000.00 $2,700,000.00 $2,400,000.00 $300,000.00 Sunk or allocated costs T he Outdoor Dept's inpact on Indoor Sales Indoor $1,500,000.00 $800,000.00 $700,000.00 $800,000.00 $(100,000.00) Total Diff $3,400,000.00 $1,400,000.00 $2,000,000.00 $1,600,000.00 $400,000.00 Sales Variable Expenses Contribution Margin Fixed expenses Net operating income (loss) $(1,840,000.00) $(940,000.00) $(900,000.00) $(400,000.00) $ (500,000.00) Total Outdoor $3,060,000.00 $1,260,000.00 $1,800,000.00 $2,000,000.00 $(200,000.00) $$400,000.00 $(400,000.00) Indoor $3,060,000.00 $1,260,000.00 $1,800,000.00 $1,600,000.00 $200,000.00 Diff $(340,000.00) $(140,000.00) $(200,000.00) $$(200,000.00) $400,000.00 10% Managing Constraints Make vs Buy Make or Buy Model Part 1 Part 2 Make DM DL VOH FOH (Trace) FOH (Allocated) Purchase Price Buy $5.00 $4.50 $1.00 $4.00 $2.25 $0.00 $16.75 $0.80 Gain/Loss Make a one time sale or not 10K levels Unit Cost Normal Sale Normal Costs Profit/Loss $16.00 $13.50 $2.50 12,000 12,000 12,000 Total $192,000.00 $162,000.00 $30,000.00 Onetime Sale Onetime Costs Profit/Loss $13.00 $9.50 $3.50 Units 2,000 2,000 2,000 $26,000.00 $19,000.00 $7,000.00 12k Level 2k Normal Costs One Time Costs (if original fixed OH is $0) $2.50 $2.50 $3.00 $3.00 $1.50 $1.50 $3.50 $0.00 $2.50 $2.50 $0.50 $0.00 $13.50 $9.50 DM DL VOH FOH VSales&Admin FSales&Admin Added processing for profitability or not Nationwide Mgf Co. Split off products Profit/ (Loss) Yes/(No) Split Point Added Processing New Sales $125,000 Smoked ($45,000) $180,000 $10,000 Y $175,000 Cooked ($60,000) $225,000 ($10,000) Z $120,000 Pickling ($25,000) $150,000 $5,000 X Make $0.80 70,000 $56,000.00 $0.00 $56,000.00 $0.00 $0.00 $0.00 $1.60 $1.35 $ 13.00 $15.95 ($0.80) Units Produced Other allocations DM DL VOH Tracable FOH FOH Purchase Price T otal Differnce Units Produce Loss or Gain New Product Gain or Loss - in Total $5.00 $4.50 $1.00 $4.00 $2.25 $0.00 $ 16.75 ($0.10) 70,000 ($7,000.00) 150,000.00 $143,000.00 Buy Difference $0.00 $5.00 $0.00 $4.50 $0.00 $1.00 $1.60 $2.40 $2.25 $0.00 $ 13.00 ($13.00) $ 16.85 T his Year What About Future Cost Present Value of an Annuity Present Value of an Ordinary Annuity Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 50 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 13.865 14.718 15.562 16.398 17.226 18.046 22.023 25.808 29.409 32.835 39.196 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 12.849 13.578 14.292 14.992 15.678 16.351 19.523 22.396 24.999 27.355 31.424 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.877 17.413 19.600 21.487 23.115 25.730 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590 15.622 17.292 18.665 19.793 21.482 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 14.094 15.372 16.374 17.159 18.256 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 7.887 8.384 8.853 9.295 9.712 10.106 10.477 10.828 11.158 11.470 12.783 13.765 14.498 15.046 15.762 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 9.108 9.447 9.763 10.059 10.336 10.594 11.654 12.409 12.948 13.332 13.801 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 8.851 9.122 9.372 9.604 9.818 10.675 11.258 11.655 11.925 12.233 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 9.129 9.823 10.274 10.567 10.757 10.962 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 9.077 9.427 9.644 9.779 9.915 0.901 0.893 1.713 1.690 2.444 2.402 3.102 3.037 3.696 3.605 4.231 4.111 4.712 4.564 5.146 4.968 5.537 5.328 5.889 5.650 6.207 5.938 6.492 6.194 6.750 6.424 6.982 6.628 7.191 6.811 7.379 6.974 7.549 7.120 7.702 7.250 7.839 7.366 7.963 7.469 8.422 7.843 8.694 8.055 8.855 8.176 8.951 8.244 9.042 8.305 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025 7.330 7.496 7.586 7.634 7.675 0.877 0.870 1.647 1.626 2.322 2.283 2.914 2.855 3.433 3.352 3.889 3.784 4.288 4.160 4.639 4.487 4.946 4.772 5.216 5.019 5.453 5.234 5.660 5.421 5.842 5.583 6.002 5.724 6.142 5.847 6.265 5.954 6.373 6.047 6.467 6.128 6.550 6.198 6.623 6.259 6.873 6.464 7.003 6.566 7.070 6.617 7.105 6.642 7.133 6.661 15% For Present Value of $1, see first sheet Present Value Annunity (Use the Table Above) Mod 7-1 Given $ 60,000.00 Annual payment 5 Periods / Year of payments 10% Discount Rate (Interest) 3.7910 Present Value Factor (from Table) * $7,000.00 Annual payment 8 Periods / Year of payments 12% Discount Rate (Interest) 4.9680 Present Value Factor (from Table) $5,000.00 8 12% 0.4040 $ 60,000.00 Annual payment 3.7910 Present Value Factor (from Table) $ 227,460.00 Amount of Present Value $7,000.00 Annual payment 4.9680 Present Value Factor (from Table) $34,776.00 Amount of Present Value $5,000.00 0.4040 $2,020.00 Capital Project Evaluation - Profitability Index Mod 7-2 PI = NPV/Investment Requires Proposal A Proposal B ($200,000.00) ($100,000.00) Investment Required $250,000.00 $ 130,000.00 Present Value of Cash inflows $50,000.00 $ 30,000.00 Net Present Value 7 5 $50,000.00 $200,000.00 0.2500 Div $ 30,000.00 $ 100,000.00 0.3000 Life of Projeect in Years Net Present Value Investment Required Profitability Index (higher is better Present Value Annunity (Use the Table Above) Mod 7-3.1 Each element is analized with the table above Given ex $ 15,000.00 Purchase Price $5,000 Savings per year 5 Periods / Year of useful life 10% Discount Rate (Interest) 5.6500 Present Value Factor (from Table) Net Present Value of Investment EXCLUDING Intangible benefits Present Value Present Value of Factor Cash Flows 3.791 $18,955.000 Annual Cost Savings 1.000 ($15,000.000) Initial Investment $3,955.00 Net Present Value Yrs 5 Now Cash Flows $5,000.00 ($15,000.00) Given prob. $ 25,000.00 Purchase Price $4,000 Savings per year 10 Periods / Year of useful life 12% Discount Rate (Interest) 5.6500 Present Value Factor (from Table above) Net Present Value of Investment EXCLUDING Intangible benefits Present Value Present Value of Factor Cash Flows 5 .650 $22,600.000 Annual Cost Savings 1.000 ($25,000.000) Initial Investment ($2,400.00) Net Present Value Yrs 10 Now Cash Flows $4,000.00 ($25,000.00) IRR - Internal Rate of Return (Use the Table Above) Mod 7-3.2 IRR Factor = Investment/Net Annual Cash Flow Given $ 18,025.00 Purchase Price $5,000 Savings per year 5 Periods / Year of useful life 12% Discount Rate (Interest) From Table Above 3.6050 Present Value Factor (from Table) $ 18,025.00 $ 5,000.00 3.6050 12% Given Investment Cash Flow/Savings IRR Factor Interest rate associated with IRR Factor (Find on Table) $ 14,125.00 Purchase Price $2,500 Savings per year 10 Periods / Year of useful life 12% Discount Rate (Interest) From Table Above 5.6500 Present Value Factor (from Table) $ 14,125.00 $ 2,500.00 5.6500 12% Payback time frame Mod 7-3.3 Investment Cash Flow/Savings IRR Factor Interest rate associated with IRR Factor (Find on Table) Cost/Annual Savings Given a certain amount of investment over time, and given a certain (variable) payback schedule, when will the invested monies be paid back? Simple Rate of Return % Mod 7-3.4 Given $100,000.00 $50,000 25,000 10 0.0000 SRoR = Annual NET Incremental Income/Initial Investment Purchase Price Incremental Revenue increase Incremental Operating Expenses increase Year of useful life Residual Value $ 50,000.00 $ 100,000.00 10 $ 10,000.00 $ 25,000.00 $ 35,000.00 eq div div + eq Given Incremental Revenue increase Year of useful life DEPRECIATION Incremental Operating Expenses increase $ 35,000.00 Net Inc Op Exp Increase $ 15,000.00 NET Incremental Income $ 100,000.00 Purchase Price 15.00% SRR $ 200,000 Purchase Price $ 100,000 Incremental Revenue increase $ 50,000 Incremental Operating Expenses increase 8 Year of useful life 0.0000 Residual Value $ 100,000 $ 200,000 8 $ 25,000 $ 50,000 $ 75,000 eq div div + eq Incremental Revenue increase Year of useful life DEPRECIATION Incremental Operating Expenses increase $ 75,000 Net Inc Op Exp Increase $ 25,000 NET Incremental Income $ 200,000 Purchase Price 12.50% SRR Value of Intangible Benefits (Use the Table Above) Mod 7-3.5 Given $ 250,000.00 Purchase Price $30,000 Savings per year 5 Periods / Year of useful life 10% Discount Rate (Interest) 3.7910 Present Value Factor (from Table) Net Present Value of Investment EXCLUDING Intangible benefits Yrs 5 Now Cash Flows $30,000.00 ($250,000.00) Present Value Factor 3.791 1.000 Present Value of Cash Flows $113,730.000 ($250,000.000) ($136,270.00) Annual Cost Savings Initial Investment Net Present Value Value of Intangible Benefits $136,270.00 Net Present Value 3.7910 Present Value Factor (from Table) $35,945.66 Value of Intangible Benefits $35,945.00 Note: Answer Key truncates the pennies Given $ 500,000.00 Purchase Price $50,000 Savings per year 10 Periods / Year of useful life 12% Discount Rate (Interest) 5.6500 Present Value Factor (from Table) Net Present Value of Investment EXCLUDING Intangible benefits Yrs 10 Now Cash Flows $50,000.00 ($500,000.00) Present Value Factor 5 .650 1.000 Present Value of Cash Flows $282,500.000 ($500,000.000) ($217,500.00) Annual Cost Savings Initial Investment Net Present Value Value of Intangible Benefits $217,500.00 Net Present Value 5.6500 Present Value Factor (from Table) $38,495.58 Value of Intangible Benefits $38,495.00 Note: Answer Key truncates the pennies Test Week 7 IRR - Internal Rate of Return (Use the Table Above) Mod 7-3.2 IRR Factor = Investment/Net Annual Cash Flow Given $ 15,977.00 Purchase Price $2,600 Savings per year 10 Periods / Year of useful life 12% Discount Rate (Interest) From Table Above 6.1450 Present Value Factor (from Table) $15,977.00 $ 2,600.00 6.1450 12% Payback time frame Mod 7-3.3 Investment Cash Flow/Savings IRR Factor Interest rate associated with IRR Factor (Find on Table) Simple enough to do in head 7-3 prob Given Investment $ 35,000 $ 10,000 $ 45,000 Simple Rate of Return % Mod 7-3.4 Given $250,000.00 $125,000 50,000 8 0.0000 Running Payback Total $ 4,000 $ 4,000 $ 8,000 $ 12,000 $ 10,000 $ 22,000 $ 14,000 $ 36,000 $ 12,000 $ 48,000 $ 10,000 $ 58,000 $ 8,000 $ 66,000 $ 4,000 $ 70,000 + eq $ 250,000.00 8 $ 31,250.00 $ 50,000.00 $ 81,250.00 eq div Investment $ 30,000 $ 10,000 $ 40,000 SRoR = Annual NET Incremental Income/Initial Investment Purchase Price Incremental Revenue increase Incremental Operating Expenses increase Year of useful life Residual Value $ 125,000.00 div End of Year 1 2 3 4 5 6 7 8 Incremental Revenue increase Year of useful life DEPRECIATION Incremental Operating Expenses increase $ 81,250.00 Net Inc Op Exp Increase $ 43,750.00 NET Incremental Income $ 250,000.00 Purchase Price 17.50% SRR Value of Intangible Benefits (Use the Table Above) Mod 7-3.5 Given $ 400,000.00 Purchase Price $40,000 Savings per year 10 Periods / Year of useful life 12% Discount Rate (Interest) 5.6500 Present Value Factor (from Table) Net Present Value of Investment EXCLUDING Intangible benefits Yrs 10 Now Cash Flows $40,000.00 ($400,000.00) Present Value Factor 5 .650 1.000 Present Value of Cash Flows $226,000.000 ($400,000.000) ($174,000.00) Annual Cost Savings Initial Investment Net Present Value Value of Intangible Benefits $174,000.00 Net Present Value 5.6500 Present Value Factor (from Table) $30,796.46 Value of Intangible Benefits $30,796.00 Note: Answer Key truncates the pennies Capital Project Evaluation - Profitability Index Mod 7-2 PI = NPV/Investment Requires Proposal A Proposal B ($400,000.00) ($200,000.00) Investment Required $460,000.00 $ 250,000.00 Present Value of Cash inflows $60,000.00 $ 50,000.00 Net Present Value 6 Div 5 $60,000.00 $400,000.00 0.1500 $ 50,000.00 $ 200,000.00 0.2500 Life of Projeect in Years Net Present Value Investment Required Profitability Index (higher is better Capital Project Evaluation - Profitability Index Mod 7-2 PI = NPV/Investment Requires Proposal A Proposal B ($250,000.00) ($180,000.00) Investment Required $300,000.00 $ 220,000.00 Present Value of Cash inflows $50,000.00 $ 40,000.00 Net Present Value 5 Div 5 $50,000.00 $250,000.00 0.2000 $ 40,000.00 $ 180,000.00 0.2222 Life of Projeect in Years Net Present Value Investment Required Profitability Index (higher is better Payback Running Total $ 4,000 $ 4,000 $ 8,000 $ 12,000 $ 10,000 $ 22,000 $ 14,000 $ 36,000 $ 12,000 $ 48,000 $ 10,000 $ 58,000 $ 8,000 $ 66,000 $ 4,000 $ 70,000 End of Year 1 2 3 4 5 6 7 8 Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 50 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.706 0.672 0.608 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.500 0.453 0.372 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.478 0.412 0.355 0.307 0.228 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.375 0.308 0.253 0.208 0.141 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 0.458 0.436 0.416 0.396 0.377 0.295 0.231 0.181 0.142 0.087 Present Value of $1 6% 7% 8% 9% 0.943 0.935 0.926 0.917 0.890 0.873 0.857 0.842 0.840 0.816 0.794 0.772 0.792 0.763 0.735 0.708 0.747 0.713 0.681 0.650 0.705 0.666 0.630 0.596 0.665 0.623 0.583 0.547 0.627 0.582 0.540 0.502 0.592 0.544 0.500 0.460 0.558 0.508 0.463 0.422 0.527 0.475 0.429 0.388 0.497 0.444 0.397 0.356 0.469 0.415 0.368 0.326 0.442 0.388 0.340 0.299 0.417 0.362 0.315 0.275 0.394 0.339 0.292 0.252 0.371 0.317 0.270 0.231 0.350 0.296 0.250 0.212 0.331 0.277 0.232 0.194 0.312 0.258 0.215 0.178 0.233 0.184 0.146 0.116 0.174 0.131 0.099 0.075 0.130 0.094 0.068 0.049 0.097 0.067 0.046 0.032 0.054 0.034 0.021 0.013 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.092 0.057 0.036 0.022 0.009 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 0.074 0.044 0.026 0.015 0.005 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.059 0.033 0.019 0.011 0.003 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.142 0.125 0.111 0.098 0.087 0.047 0.026 0.014 0.008 0.002 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.038 0.020 0.010 0.005 0.001 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.081 0.070 0.061 0.030 0.015 0.008 0.004 0.001 Module 5.1B3 Compute the Standard Cost B3 Problem Write All Numbers in absolute form (positive) AQp*SP AQp*AP SQ*SP Given Answer Use for Formula Actual Price = AR Actual Qty Purch = AH Standard Price = SR Standard Quantity - Calc.. SH Price Unit #DIV/0! DLH $0.00 DLH $0.00 Actual Result #DIV/0! Difference of Act vs Flex FOH Budget Variance #DIV/0! Favor Standard Quantiry Expected Sales Price #DIV/0! Unit #DIV/0! AQ (AP#DIV/0! SP) $0.00 TOTAL #DIV/0! Neg = Favorable Pos = Unfav (AQ- - SQ) $0.00 TOTAL $0.00 Neg = Favorable Pos = Unfav #DIV/0! SP $0.00 - FOH App Rate Labor Standard $0.00 Difference in Flex vs Stand Type of Variance $0.00 Unfavor Neg = Favorable Pos = Unfavorable Pos = Favorable Neg = Unfavable Total DM Variance Actual Price Actual Qty Standrd Price - FOH App Rate Standard Qty - Calc.. Materials Flexible Budget $0.00 Standand Price and Quanities Yards per unit a Yard DL Hrs per Unit per DL Hr Budgeted OH Budgeted Activity Direct Material Price Varience #DIV/0! Pos = Unfav Per Unit Cost of DM #DIV/0! #DIV/0! DLH (denominator) Actual Qty Purchased X (Actual Price -Standard Price) Actual Qty Purchased (*) (Actula Price (-) Standard Price) #DIV/0! $0.00 Neg = Favorable Materials Purchased Total Cost of Materials Purchased $0.00 Budgeted and Actual Information Planned Production Actual Production Units Units Direct Material Quanty Varience $0.00 Materials Purchased Total Cost of Materials Purchased Materials Used Yards DL Hours Used Actual DL Cost hours Pos = Unfav Standard Quantiy $0.00 Yards Direct Labor Rate Varience #DIV/0! Pos = Unfav Actual DL Cost #DIV/0! Standard Price X (Actual Quanity Used - Standand Quanty (-) Standard Price) Actual Quantity Used Standard Quanity $0.00 $0.00 Neg = Favorable DM Per Unit Actual Production 0 Actual Quantity DL Hours X (Actual Rate -Standard Rate DL Hours Used Actual DL Cost Standard Rate #DIV/0! $Neg = Favorable DL Hours Used Actual DL Cost $- Neg = Fav Pos = Unfav
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