Chapter 04 - Fundamentals of Cost Analysis for Decision Making
4-61. (continued) Incremental Cash Flow – Alternative A Make Containers and Perform Maintenance
Year of Operation 2 3
0 Buy GHL Tax savings on purchase Cash flow on purchase Other materials Labor: Supervisor Labor: Workers Rent: Warehouse Maintenance Other expenses Manager's salary Total costs Tax savings Cash flow due to costs Tax effects of depreciation Tax effect of GHL costs Total cash flow Discount rate factor (10%) Present value NPV
1
4
$(500,000) (50,000) (450,000) (85,000) (36,000) (157,500) (80,000) $(1,358,500) 543,400 $(815,100) 60,000 80,000 $(675,100) 0.9091 $(613,727)
$(500,000) (50,000) (450,000) (85,000) (36,000) (157,500) (80,000)
…show more content…
) 611,400 $(917,100) 60,000 72,000 $(785,100) 0.9091 $(713,727)
$(450,000) (50,000) (360,000) (85,000) (36,000) (92,500) (80,000) (375,000) $(1,528,500) 611,400 $(917,100) 60,000 72,000 $(785,100) 0.8264 $(648,843)
$(450,000) (50,000) (360,000) (85,000) (36,000) (92,500) (80,000) (375,000) $(1,528,500) 611,400 $(917,100) 60,000 72,000 $(785,100) 0.7513 $(589,857)
$(450,000) (50,000) (360,000) (85,000) (36,000) (92,500) (80,000) (375,000) $(1,528,500) 611,400 $(917,100) 60,000 72,000 $(785,100) 0.6830 $(536,234)
1.0000 $$(3,082,945)
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Chapter 04 - Fundamentals of Cost Analysis for Decision Making
4-61 (continued) Incremental Cash Flow – Alternative C Buy Containers and Perform Maintenance
Sell machinery Tax savings on sale Cash flow on sale Sell GHL Tax savings on sale Cash flow on sale Other materials Labor: Supervisor Labor: Workers Rent: Warehouse Severance pay Other expenses Manager's salary Container contract Total costs Tax savings Cash flow due to costs Tax effects of depreciation Tax effect of GHL costs Total cash flow Discount rate factor (10%) Present value NPV 0 $200,000 160,000 $360,000 $560,000 56,000 $616,000 $(50,000) (50,000) (90,000) (85,000) (65,000) (1,250,000) $(1,590,000) 636,000 $(954,000) 8,000 $(946,000) 0.9091 $(860,000) $(50,000) (50,000) (90,000) (85,000) (65,000) (1,250,000) $(1,590,000) 636,000 $(954,000) 8,000 $(946,000) 0.8264 $(781,818) $(50,000) (50,000) (90,000) (85,000) (65,000) (1,250,000) $(1,590,000) 636,000
($372 + $135 + 500) / ($2.21 - ($0.83 + .40)) = 1,028 [+/- 31]
Scenario: Richman Investments provides high-end smartphones to several employees. The value of each smartphone is $500, and approximately 1,000 employees have these company-owned devices. In the past year, employees have lost or damaged 75 smartphones .
Current 2007 Base Scenario 1 110,000,000 110,000,000 110,000,000 1.0% 1% 1.2% 1,100 1,100 1,320 $2.00 $1,80 $1,80 $2,200 $0 $0 2,016 2,016 2,016 52 52 52 $230,630,400 $0 $0 $0 $0
Jack (45,000 – 500 – 2000 * 25%, yr1/ 134,500 – 1,000 – 2,500 * 25%, yr2)
System.out.println(); System.out.println("Total Sales \t Total Compensation"); System.out.println("----------- \t ------------------"); double minimumSales = 80000; double potentialCommission = minimumSales * 0.05; double potentialCommission1 = 85000 * 0.05; double potentialCommission2 = 90000 * 0.05; double potentialCommission3 = 95000 * 0.05; double potentialCommission4 = 100000 * 0.0625; double potentialCommission5 = 105000 * 0.0625; double potentialCommission6 = 110000 * 0.0625; double potentialCommission7 = 115000 * 0.0625; double potentialCommission8 = 120000 * 0.0625; double potentialCompensation = salary + potentialCommission; double potentialCompensation1 = salary + potentialCommission1; double potentialCompensation2 = salary + potentialCommission2; double potentialCompensation3 = salary + potentialCommission3; double potentialCompensation4 = salary + potentialCommission4; double potentialCompensation5 = salary + potentialCommission5; double potentialCompensation6 = salary + potentialCommission6; double potentialCompensation7 = salary + potentialCommission7; double potentialCompensation8 = salary + potentialCommission8;
$135,000 $90,000 TOTAL REVENUE $3,136,500 $2,352,375 $1,568,250 Expences TOTAL VARIABLE COSTS $454,000 $340,500 $227,000 TOTAL FIXED COSTS $1,403,000 $1,403,001 $1,403,002 TOTAL EXPENSE BEFORE IT $1,857,000 $1,743,501 $1,630,002 EBIT $1,279,500 $608,874 -$61,752 Depreciation $320,000 $320,001 $320,002 EBITDA $1,599,500 $928,875 $258,250 Furnishing Interest $110,000 $110,000 $110,000 20yr Mortgage Interest $182,000 $182,000 $182,000 TOTAL INTEREST $292,000 $292,000 $292,000 TAXES (40%) $395,000.00 $126,749.60 -$141,500.80 Furnishing Principal $180,160 $180,160 $180,160 20yr Mortgage Principal $49,713 $49,713 $49,713 TOTAL PRINCIPAL $229,873 $229,873 $229,873 NET INCOME $362,627 -$39,749 -$442,124 DIVIDEND PAYMENT $29,010 -$3,180 -$35,370 RETAINED EARNINGS $333,617 -$36,569 EBIT/INTEREST 4.38 2.09 (0.21) EBITDA/INTEREST 5.48 3.18 0.88 BURDEN $675,121.67 $675,121.67 $675,121.67 EBIT/BURDEN 1.90 0.90 (0.09) ROE= Net Income/OE (H1) 32.97% -3.61% -40.19% Revenue Estimates Revenue Item 100% Monthly 75%
Account/Description Manufacturing overhead Cost of goods sold Actual overhead costs Incurred on account Indirect materials Indirect labor Depreciation $120,000 14,000 20,000 8,000 $162,000 Applied overhead costs Job 7640 Job 7641 Job 7642 $43,200 57,600 66,000 $166,800 $162,000 166,800 $4,800
Supplier A: EOQ = Square root of (2 x 1500 x $1,000) = S.R. of 3,000,000 = 209
(60% are 30 s) + (15% are 40 s) + (5% are 240 s) + (3% are 50 s)
Plus fill the rest of the order with 402,s – 3,000 x 0.4 = 1,200
665 0.34 174 216 537 234 122 1.2 0.2 60.4 9.6 0.22 65.0 2,149 554 66.6 2,483 80,300 492 14 23 6 21 15 874 524 12,216 30
5.000,00 $ 7.500 151.250 20 35.000,00 $ 12.500 321.250 26 $ 58,20 $ 110.000,00 4.000 333.500 83 115,38
was 7,920 units. The company has provided the following data concerning the formulas to be used in its
7. Though numbers given in the cost data can not be contested, I would definitely contest the way total cost has been computed. The item 345 department operates within a large manufacturing facility that churns out number of other products too. Hence judging the profitability of item 345 on the basis of total cost is not practical.
4. Put all of this together to simulate the lost revenue due to copier breakdowns over 1 year to