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Materials yield variance = Total actual materials input x Standard materials input cost
Less: Actual output x Ave. standard output cost
Ave. std. input cost = Budgeted Std. Material Costs/Budgeted Std. Materials Input
Ave. std. output cost = Budgeted Std. Material Costs/Budgeted Std. Materials Output
MATERIALS: OVERHEAD:
LABOR:
RESPONSIBILITY ACCOUNTING
1 Cost Center 2 Profit Center
Company Name Company Name - Segment Name
Department Name Segmented Income Statement
Responsibility Cost Report For the month of ______, 20xx
For the Year Ended December 31, 20xx Actual Budget Var.
Actual Budget Var. Sales Revenues xx xx xx
Direct Costs Direct Variable Costs
Controllable Costs Cost of goods sold xx xx xx
Direct materials Sales commissions xx xx xx
Direct labor Total direct variable costs xx xx xx
Indirect materials Contribution margin xx xx xx
Repairs and maintenance Direct Fixed Costs
Equipment operating cost Manufacturing xx xx xx
Total Selling and administrative xx xx xx
Noncontrollable costs Total direct fixed cost xx xx xx
Supervision Segment margin or
Depreciation - equipment contribu. to indirect costs xx xx xx
Total Common fixed costs
Toral direct costs Manufacturing xx xx xx
Selling and administrative xx xx xx
Indirect costs allocated to the dept. Total common fixed cost xx xx xx
Superintendence Operating Income xx xx xx
Heat, light, and power 3 Investment Center
Taxes and insurance Return on Investment (ROI)
Other plant occupancy cost = Net Operating Income / Average Operating Assets
Depreciation, plant = NOI Sales
x
Total Sales AOA
TOTAL = Operating Profit Margin x Asset Turnover (Return on Sales)
2 Revenue Center Residual Income
Sales Price Variance = (ASP - BSP) x Actual unit sales = Operating Income - (Min. Rate of Return x AOA)
Sales Volume Variance = (AUS - BUS) x MBAve.CM/unit Economic Value Added (EVA)
Sales Mix Variance = (FBACMu - MBACMu) x AUS = OPAT - (Net Assets x WACC)
TRANSFER PRICING GROSS PROFIT ANALYSIS
1 MINIMUM TRANSFER PRICE Company Name
Selling Division operating: Gross Profit Variation Analysis
AT CAPACITY: For 20xx
Min. TP/Floor/Lower Limit = VC + CM lost Increase in Gross Profit accounted for as follows:
BELOW CAPACITY / WITH IDLE CAPACITY Sales Price Factor:
Min. TP/Floor/Lower Limit = VC Sales - Current Year xx
From Buying Division: Sales - CY at LY Prices
Max. TP/Ceiling/Upper Limit = SP outside Product 1 xx
Product 2 xx (xx)
2 MARKET-BASED TRANSFER PRICE Increase (Decrease) in GP xx
Transfer Price = Market Price - Discounts Cost Factor:
COGS - CY xx
3 COST-BASED TRANSFER PRICE COGS - CY at LY Costs
A. Variable Cost Product 1 xx
Transfer Price = DM + DL + VOH Product 2 xx (xx)
B. Full Cost Decrease (Increase) in GP xx
Transfer Price = DM + DL + VOH + FOH + portions of SA costs Quantity Factor:
C. Alternative Cost Measures Total quantity sold in CY (units) xx
C.1 Full Absorption Cost-based TP Total quantity sold LY (units) (xx)
Transfer Price = DM + DL + VOH + FOH Increase (Decrease) in quantity xx
C.2 Cost-Plus Transfer Multiplied by:
Transfer Price = Variable or Full Absorp. Cost + markup Ave. GP per unit Last Year xx xx
Sales Mix Factor:
4 NEGOTIATED TRANSFER PRICE Ave. GP per unit CY at LYP** xx
Transfer Price = (Upper Limit + Lower Limit) Less: Ave.GP per unit LY xx
2 Increase (Decrease) in GP per unit xx
Multiplied by: Quantity sold CY xx
Increase (Decrease) in GP xx
Net Increase (Decrease) in GP xx
FINANCIAL STATEMENT ANALYSIS
FINANCIAL STATEMENT ANALYSIS
FINANCIAL STATEMENT ANALYSIS
FINANCIAL STATEMENT ANALYSIS
COST OF CAPITAL RISK AND RETURN
1 Cost of Long-Term Debt ROR = dividends + ending value - beg. value
BEFORE TAX COST: beg. value
a. Yield to Maturity - INTERPOLATION ROR = RF + [b x (RM - RF)]
cost = (MV x PVIF) + (I x PVIFA) where: RF = risk free rate of return
b. Yield to Call - INTERPOLATION RF = r* + inflation premium
cost = (MV x PVIF) + (I x PVIFA) r* = real rate of interest
where: n = years when bonds can be called in b= (correlation coe. x SD of stock) / SD of market
MV = FV + Call premium = Covariance of stock and market / variance of market
c. Approximation = SD of asset / benchmark's SD
cost = I + Face Value - Net Proceeds RM = market return
n market risk premium = b x (RM - RF)
Face Value + Net Proceeds range = optimistic ROR - pessimistic ROR
2 expected return = ∑ (probability x returns)
NP = Total proceeds - Floatation Costs Std. Deviation = √∑(returns - expected r.)^2 x probability
AFTER TAX COST: = √∑(returns - expected r.)^2 / (n-1)
cost = BTC x (1-T)
2 Cost of Preferred Stock Coefficient of Var. = Std. Deviation / expected return
rp = Annual Dividend per share Total security risk = Nondiversifiable risk + Diversifiable risk
Net Proceeds
3 Cost of Common Stock / Retained Earnings LEVERAGE AND CAPITAL STRUCTURE
rc = D1 DOL = CM / CM - FC
+g
P0 = (TR-TVC) / (TR-TVC-TFC)
where: D1 = present dividends to be paid per share = % △ in EBIT
P0 = value of common stock % △ in Sales
= D1 DFL = EBIT / [EBIT - I - (PD - 1/1-T)]
required return - g = % △ in EPS
g=
√ n present
past
% △ in EBIT
DTL = CM / [EBIT - I - (PD - 1/1-T)]
= DOL X DFL
rc = RF + b (RM - RF) = % △ in EPS
rc = EPS / Market price per share % △ in Sales
rc = D1 <- cost of issuing new Value of firm = NOPAT / WACC
+g common stock
<- cost of issuing new
+g common stock
NP
CAPITAL BUDGETING
IMPORTANT NOTES:
- Cash outflows are made at the beg. of the period - Yield-preference theory denotes profit (long-term investors)
- Cash inflows are received at the end of the year - Liquidity-preference theory refers to cash dividends (short-term investors)
- Tax savings or tax shield arises from dep'n expense
- The residual value of the investment is considered as
cash inflow at the end of the project life
- NPV uses cost of capital as its discount rate
- IRR uses its own discount rate
FORMULAS:
Net Cost of Investment: Annual Cash Inflows:
Cash outflows (+) Indirect M. Direct M.
Net purchase price of the new asset xx Sales xx xx
(discounts are deducted taken or not) Less: Out-of-pocket exp. xx xx
Costs to bring the assets to its location xx Cash flows before tax xx xx
Additional tax in case there is a gain on sale Less: Dep'n expense xx
from disposal of old asset xx Profit before tax xx
Additional tax from savings on avoided cost Less: Income tax xx xx
of repairs xx PROFIT xx
Increase in working capital xx xx Add back: Dep'n expense xx
Less: Cash Inflows (-) ANNUAL CASH INFLOWS xx xx
Proceeds from sale or trade-in allow. From
disposal of old asset xx Total Cash Inflows: for PVCI:
Tax savings from loss on sale of old asset xx Annual cash inflows xx <- PVIFA
Savings on repairs of old asset, net of tax xx (xx) Residual value, net of tax xx <- PVIF
NET COST OF INVESTMENT xx Recovery of working capital xx <- PVIF
TOTAL CASH INFLOWS xx
CAPITAL BUDGETING
(SILENT)