Class Oct 19 Student - Class Oct. 19 Additional Cost...

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Class Oct. 19 Additional Cost Management Tools
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Revenue (Price X Volume) - Cost of Goods Sold Direct Labor Direct Material Factory Overhead Gross Profit - Other Expenses Research and Development Costs Profit before Taxes Procurement Price / Cost Analysis Tools Index Analysis Variable Costs Cost-Vol-Profit Analysis Fixed Costs Quantity Discount Analysis
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In the U.S., a useful index is the Producer Price Index (PPI). What is the Producer Price Index? How is it used by buyers? A price index measures the change over time in the price of a product or service versus starting price at time ‘t = 0’. Index Analysis 1 Price = $1500 Index = 100 In 1991 Prices go up 10% to $1650 1991 Price = $1650 Index = 110
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Family of indexes that measures the average change over time in the selling prices received by domestic producers of goods and services. PPI’s measure price change from the perspective of the seller Producer Price Index
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www.bls.gov/data/
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Calculate the Percentage Change in the PPI End - Beginning Beginning = 241.3 - 215.8 215.8 = Change 25.5 215.8 = 0.118 11.8%
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What Should You Pay? Producer Price Index Case Study
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Step 3 – Calculate the Percentage Change in the PPI Step 1 – Calculate the price per unit Step 2 – Calculate the Percentage Increase in Price Paid
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Revenue (Price X Volume) - Cost of Goods Sold Direct Labor Direct Material Factory Overhead Gross Profit - Other Expenses Research and Development Costs Profit before Taxes PPI Fixed Costs Procurement Cost Analysis Tools Variable Costs Quantity Discount Analysis Cost-Vol-Profit Analysis
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Estimating Overheads Profit Margin Factory Overhead Direct Labor Cost Direct Materials Cost
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Class Oct 19 Student - Class Oct. 19 Additional Cost...

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