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14 Cards in this Set
- Front
- Back
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Service dept rate |
Amount spent as a whole --------------------------------------- Total # (hrs/checks etc.) for the divisions |
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Rate of return on investment (ROI) |
ROI = income from operations -------------------------------------- Invested assets |
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DuPont formula |
Used to analyze differences in ROI
ROI = profit margin x investment turnover
Profit margin = income from op ----------------------- Sales Investment turnover = sales --------- Inv. Assets |
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Minimum acceptable income |
Invested assets x minimum ROR |
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Residual income |
Income from op - minimum acceptable income |
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Transfer pricing - market price approach |
Transfer price = market price
Income stays the same |
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Transfer pricing: negotiated price approach |
V/c per unit
Increase in suppliers division income from op:
(Transfer price - VC/unit) x # transferred
Increase in purchasers division income from op:
(Market price - Transfer price) x #transferred |
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Bottleneck production |
Unit contribution margin per production bottleneck:
Unit cm ------------ Bottleneck per unit
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To determine price of "a" that would make "a" equal to the profitability of "b" |
Unit cm of "b" per bottleneck hour = x - v/c per "a" ------------------- Bottleneck hr for "a" |
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Average rate of return (ARR) |
ARR = estimated average annual income ------------------------------------- Average investment
To find average investment:
(Cost + residual value) --------------------------------- 2 |
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Cash payback period |
If cash flow is not even every year :
Have to see what year the total cash flow equals the investment
If cash flow is even every year :
Initial cost —————— Annual net cash flow
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Net present value |
Multiply the present value factor and the cash flow for each year..... Add those up to get your total present value of cash flows.... Then subtract your amount to be invested.... You get your net present value
For annuity
Just have to multiply once by the value factor of the last year. |
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Present value index |
Total PV of net cash flows --------------------------------------- Amount to be invested |
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Internal rate of return (IRR) |
If not equal annual net cash flows then have to estimate
If equal net cash flows
Amount to be invested ---------------------------------- Equal annual net cash flows |
