Materials All variable 360‚000 Direct Labour All variable 200‚000 Overhead costs: Electricity and water 60% variable 60‚000 Managerial salaries 20% variable 100‚000 Maintenance costs 40% variable 100‚000 Depreciation 0% variable 120‚000 Indirect labor 50% variable 120‚000 Non manufacturing costs Accounts Nature or Classification Amount in Tshs 000 Administration expenses 0% variable 120‚000 Marketing expenses 40% variale 100‚000 Depreciation costs 0% variable 80‚000
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sequence {x1‚ x2‚ ...‚ xT } or {xt} ‚ t = 1‚ ...‚ T‚ where t is an index denoting the period in time in which x occurs. We shall treat xt as a random variable; hence‚ a time-series is a sequence of random variables ordered in time. Such a sequence is known as a stochastic process. The probability structure of a sequence of random variables is determined by the joint distribution of a stochastic process. A possible probability model for such a joint distribution is: xt = α +
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the convention. What would the indifference point be between option 1 and option 2? a. 500 units; b. 400 units; c. 300 units; d. 200 units 7. The following information is for Winnie Company: P roduct A: Product B: Revenue $4.00 $6.00 Variable Cost $1.00 $2.00 Total fixed costs are $40‚000. What is the break-even point‚ assuming the sales mix consists of two units of Product A and one unit of Product B? a. b. c. d. 2‚000 units of B and 4‚000 units of A 2‚025 units of B and
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Normal Distribution:- A continuous random variable X is a normal distribution with the parameters mean and variance then the probability function can be written as f(x) = - < x < ‚ - < μ < ‚ σ > 0. When σ2 = 1‚ μ = 0 is called as standard normal. Normal distribution problems and solutions – Formulas: X < μ = 0.5 – Z X > μ = 0.5 + Z X = μ = 0.5 where‚ μ = mean σ = standard deviation X = normal random variable Normal Distribution Problems and Solutions – Example
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Sunk costs: costs already incurred‚ cannot be changed by any decision COST behavior‚ fixed vs. variable “in the long term‚ all costs are variable” VC: increase as number of units increases‚ based on level of activity FC: remain same over range of activity‚ “relevant range” over time this changes‚ committed or discretionary‚ the latter wont effect the production capacity. Step or “semi-variable” costs: change in response to
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Fixed cost is the difference between total cost and total variable cost. Answer Selected Answer: True Correct Answer: True Question 2 In general‚ an increase in price increases the break even point if all costs are held constant. Answer Selected Answer: False Correct Answer: False Question 3 Parameters are known‚ constant values that are usually coefficients of variables in equations. Answer Selected Answer: True
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Exercise 1 (Identifying Relevant Costs) Case 1 a. b. c. d. e. f. g. h. i. j. k. l. Item Relevant Sales revenue .................................. X Direct materials ............................... X Direct labor ..................................... X Variable manufacturing overhead .......................................... X Book value – Model E7000 machine ........................................... Disposal value – Model E7000 machine ........................................... Depreciation – Model
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Simulation * Discrete Probability Distribution * Confidence Intervals Calculations for a set of variables Mean Median 3.2 3.5 4.5 5.0 3.7 4.0 3.7 3.0 3.1 3.5 3.6 3.5 3.1 3.0 3.6 3.0 3.8 4.0 2.6 2.0 4.3 4.0 3.5 3.5 3.3 3.5 4.1 4.5 4.2 5.0 2.9 2.5 3.5 4.0 3.7 3.5 3.5 3.0 3.3 4.0 Calculating Descriptive Statistics Descriptive Statistics: Mean‚ Median Variable N N* Mean SE Mean StDev Minimum Q1 Median Q3 Maximum Mean 20 0 3.560 0.106
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(Kimmel‚ P.‚ Weygandt‚ J.‚ & Kieso‚ D. 2003) The analysis is used to maximize efficiency in a business. In order to be effective the CVP analysis has to make several assumptions. These assumptions are that the costs can be fitted into either fixed or variable categories. The next assumption is that changes that a business makes in its activities are the only thing that will affect costs. The business must assume that all units of a good or service are sold. The last two assumptions are that “behavior
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the amount of revenue per product that is available to "contribute" towards the fixed costs and the profit of the company. Since‚ for digital products‚ the variable costs are typically very small‚ or zero‚ most of the revenue earned from the sale of a product form the contribution margin. Assuming the contribution margin (unit price - unit variable cost) > 0‚ then the product is worth marketing‚ since the fixed costs are sunk. This also assumes the product does not cannibalize sales from another product
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