too rigid. http://blog.trginternational.com/trg-in-the-board-room/bid/162036/Traditional-budgeting-approach-advantages-and-disadvantages http://www.12manage.com/forum.asp?TB=fraser_beyond_budgeting&S=11 http://www.tutor2u.net/business/accounts/incremental-budgeting.htm Advantages of traditional budgeting The budget is stable and change is gradual. Managers can operate their departments on a consistent basis. The system is relatively simple to operate and easy to understand. Conflicts should be avoided
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production capacity. This report seeks to determine how to loosen constraints on production and identify the most profitable product line given current production limitations. Incremental analysis is used to determine both the benefit of one additional hour of production time in the coating and sharpening process and the incremental yearly profit associated with adding a new inspection station. Five Star Tools is a small family-owned firm that manufactures diamond coated cutting tools used by jewelers
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CHAPTER 8 RESPONSIBILITY ACCOUNTING‚ SEGMENT EVALUATION AND TRANSFER PRICING [Problem 1] 1. ROI of Div A (past year) = = 30% 2. ROI of Div A (with new product) = = 27.6% *(P960‚000 = P8‚000 x 40% - P2‚240‚000) 3. No; because the new product line would decrease the overall ROI of Division A. 4. Yes; because the new product line’s ROI is 24% (i.e.‚ P960‚000 + P4‚000‚000) and is not lower than the overall ROI
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26 Incremental Cost 3.23 Less: Transportation‚ storage (.20) Labor (.50) 2.53 Profit Contribution 2.73 Volume 30 tons (30‚000 Kg) Contribution Margin( 2.73×30‚000) 81‚900 Question 2: The impact on profit in 1966(before taxes) of selling 85 tons at a retail price of 6.85 Price to Dansk Minox 4.40 Incremental Cost
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proceed (without making any calculations)? I would estimate the incremental cash flows over the economic life of the new machine‚ taking into consideration the after-tax salvage values of the old and new machine respectively. Changes in net working capital would be figured in as well. For the terminal year‚ we would assume that the net working capital is recovered and treat it as a cash inflow. 2. Explain the relevance of incremental cash flows‚ sunk costs‚ and incidental costs in the context
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Existing Product Technologies and the Failure of Established Firms Rebecca M. Henderson Massachusetts Institute of Technology Kim B. Clark Harvard University This paper demonstrates that the traditional categorization of innovation as either incremental or radical is incomplete and potentially misleading and does not account for the sometimes disastrous effects on industry incumbents of seemingly minor improvements in technological products. We examine such innovations more closely and‚ distinguishing
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of the Kunst 1600 can be attributed to these three elements. Value Elements: • Cost savings due to the elimination of oil change expenses and messiness -- Most owners and technicians trivialize oil change related costs. • Incremental revenue and profits –Incremental revenue and profits refers to new income that can be attributed to greater product efficiency. In this case study‚ this occurs in only one segment – light commercial refrigerator repairs. In all other segments‚ repair firm
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been characterized as either radical or incremental [1]. Incremental innovation refers to changes that “build on and reinforce the applicability of existing technology”. These changes strengthen the value of existing technology and the products that use them by making the products more reliable‚ simpler to use‚ lower in cost‚ or accessible to a larger customer base. Most established companies are involved in researching‚ creating‚ and marketing incremental innovations to their products. Radical
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and markets it as a competitive advantage. The company is now considering replacing the manual equipment used for recycling in Mexico by new equipment that requires less material and labor costs. 1. Compute the incremental peso cash flows for the life of the project. The incremental cash flows of the next 10 years should be calculated. The initial cash outflow is the cost of investment in the new equipment (3‚500‚000 Pesos). Also‚ selling the manual equipment for cash value of 175‚000 Pesos
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In the incremental differential cost revenue analysis above‚ quantitative analysis was conducted from the aspect of the manufacturing costs. In addition‚ it is necessary to consider management and marketing strategy from qualitative aspects as well. Namely‚ qualitative
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