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Enterprise Level Analysis Topics Enterprise Level Analysis Topics Agribusiness Finance LESE 306 Fall 2009
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Enterprise #1 Production costs Overhead Enterprise #2 Production costs Overhead Enterprise #n Production costs Overhead Total Overhead Two approaches : 1. Allocate total overhead using ABC accounting procedures 2. Sum the budgeted overhead at the enterprise level and check for consistency at the firm level (e.g., does Total overhead = Σ overhead i ) #1 #2 #1 #2 #1 #2 #1 Σ #2 Building up from Enterprise Level Building up from Enterprise Level
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Enterprise #1 Design of an Enterprise budget. Construct budget for all enterprises, multiply times level of activity and compare to ABC approach. Overhead:
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P BE = TE÷ Q Enterprise #1 Calculating Breakeven Price…. Overhead:
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P BE = TE÷ Q = $2.44 Conclusion: Price could fall from $2.60 to $2.44 Enterprise #1
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