MAS Summary Notes Comprehensive 2019 PDF

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Summary

CMR x MS = PDiscussion: CVP 16 r 14 i s 12 e Total Cost = F x C + VC 10 run 1 2 3 4y = a + b x Least-Square Regression Method Dependent Y intercept Slope Independent Variable (Fixed Cost) Variable ∑ y = n a + b ∑ x∑ x y = a ∑ x + b ∑ x 2 Slope (b) = rise = ∆Y run ∆XCM = F x C + P x = F x C (increase...

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Discussion: CVP 16 Batch 1 1. Cost Behavior Analysis 2. Cost Valuation Profit Analysis 3. Absorption & Variable Costing

14

Total Cost = F x C + VC

10

y= a

r i s e

12 _______ run 1 2 3 4

+ bx Least-Square Regression Method

Dependent Y intercept Slope Independent Variable (Fixed Cost) Variable

∑y=na+b∑x ∑ x y = a ∑ x + b ∑ x2

Slope (b) = rise = ∆Y run ∆X

CM = F x C + P S -VC CM -F x C P

x = F x C (increase) CM/unit x = unit increase

―Before interest & taxes‖

DOL = CM OI

Indifference Point 1. Unit CM x Q – FC = Unit CM x Q – FC

∆% in profit = ∆% Sales x DOL OI

MS = Sales – BES MSR = MS Sales

2. FC + (VC unit x Q) = FC + (VC unit x Q)

BES = F x C CMR

CM x MS = P Sales Sales Sales

BEP units = F x C

CMR x MSR = NPR

CM/unit

[

CMR x (Sales – BES) = P CM – FxC = P P=P

] [ ]

S CM/S x MS/S = P/S S CMR x MS = P

Page 1 of 50

Discussion: Sales Mix

BEP units = F x C WtdAvg CM/Unit * products x y CM/unit xxx xxx Sales Mix Ratio x% x% _____________ Wtd.Avg.CM/Unit xxx + xxx = xxx Note: Cetiris Paribus  unless otherwise stated, other ―things‖ are constant 1. Degree of operating leverage  Operating Leverage function = DOL = CM Profit  ∆%Sales x OLF (or) DOL = ∆ %P

MAS

BES = F x C CMR

1. CMR = CM = ∆CM Sales ∆Sales

BES = F x C + P CMR

2. CMR = F x C = ∆F x C BES ∆ BES

S

=

FxC CMR- ROS 

3. CMR = P = ∆ P MS ∆ MS

Note: this can be use only if the profit is a percentage.

Page 2 of 50

DM DL VPOA FFOA TMC WIP

―Variable Cost‖ CGM

AY VY ∆Y

Sales (CGS) GP

P>S < E>B < A>V <

xxx xxx xxx

∆Y = ∆ Inventory x FFOA/unit

FGI

- (Ope. Exp) Period Cost (fully expense) ―Variable Costing‖ NY

(P vs S)

(E vs B)

Example: Dep‘n.

Variable Costing

FFOA Dep‘n. (factory equipment)

Absorption Costing - PRODUCT COST

- PERIOD COST

AC – DC * ∆y fluctuating with sales * ∆y fluctuating with production & sales

Page 3 of 50

Batch 2

Special Order [refer to your formulas]!!

4. Relevant Costing 5. Budgeting 6. Standard Costing

Continue or Discontinue MS – 04

Make or Buy

Sales VC CM - F x C (Direct) Traceable Segment Margin - F x C (Indirect) Common Profit

Note: Add lang ng add!!

Make

Buy

DM DL VPOA FFOA HC

xxx xxx xxx xxx xxx

xxx* xxx*

BEP = F x C CM/unit

Product price

---

xxx

1. SD Point

xxx

xxx

*AC *OC

xxx xxx

xxx

Note: Income sacrifice or forgone if on make! xxx

relevant cost to make

Best product Combination

=

(+) => Continue segment (-) => Shutdown segment

F x C – SD Cost CM/unit

Note: SD point > continue Produce SD point < discontinue

relevant cost to buy

= CM/unit hours/unit

CM/hour or [scarce resources]

Page 4 of 50

0 Sell or Process Further

Joint Process 

L NCL

NC

E

A

M I L O

CL

C

1.

Split - off Point

- WC

F0

- COC

CB

―Joint Cost‖ FPC 1. Collection Platform! Sale at Split off Sales if Process further xxx Less: FPC (xxx) Advantage/Disadvantage

Sale at Split-off Sale FPC

xxx

2.

xxx xxx

March xxx February xxx January xxx

Process further

xxx ---

xxx (xxx)

xxx

xxx

Total Collection xxx

*Best Product Combination* Note: [Refer to your formulas]!!

MS – OS – Budgeting!! Quantitative Budget = PLAN MASTER BUDGET  

Operating – IS Financial – BS

Production Budget DM by - DM produced DM end DM used

DM used DL FOH TMC

WIP by TMC - WIP end CGM Page 5 of 50

FGI by CGM - FGI end CGS

Sales CGS GP - Express nY

100% (65%) 35% (25%) 10%

FOH Vminus = AC–SC = AFOH–SFOH

MS: 06 Standard Costing [Refer to your summary]

DM Variance = AC – SC = (AP x AQ) – (SP x SQ) MQV = ∆Q x SP = (AQ–SQ) SP MPV = AQ x ∆P = AQ (AP–SP)

2 way

3 way

4 way

Con.Vol AFOH

S.E.VOL AFOH Spending CON BAAH Efficiency BASH VOL SHSR VOL

S.S.E.VOL

BASH MPUV = AQused x ∆P MPPV = AQpurchased x ∆P

SHSR (SFOH)

DL Variance= AC – SC= (AR x AH)–(SR x SH) LE V = ∆H x SR= (AH–SH) SR LR V = AH x ∆R= AH (AR–SR)

FOH = fixedCost + slope (activity level)

PLAN = BH = BFOH OPERATION =AH = BAAH CONTROLLING =SH = BASH

x  

y = a + b‗x‘ if BASH ‗x‘= Standard Hours based on Actual Production if BAAH ‗x = Actual Hours based on Actual Production

Page 6 of 50

Variable Spending Fixed Spending Efficiency Volume Unit

Capital Budgeting 1. Payback Period = Net Initial Cost of Investment Amount Net Aler-Tax Cash (Inflows) 2. Bail-Out Payback Period = Net Initial of Investment *Includes Salvage Value!

3. Accounting Rate of Return : Average Annual Net Income Investment 4. Payback Reciprocal : Net Cash Inflows = _____1___________ Investment Payback Period

Discounted Techniques

1. –

PV of Cash Inflows PV of Cash Outflows Net Present Value

÷ =

PV of Cash Inflows PV of Cash Outflows Profitability Index

÷

NPV

=

Investment NPV Index

2. Internal Rate of Return (IRR) 2.1 PVF for IRR = Net Investment Cost Net Cash Inflows

Microeconomics Ed = ∆% in Quantity Demanded = ∆% in Quantity Demanded ’ ∆ in Price ∆% in Price Average Quantity Average Price

Page 7 of 50

Ed >1 = Elastic Ed =1 = Unit Elastic/Unitary Ed Ordering Cost > Carrying Cost * Where to place? > Stock-out Cost > Carrying Cost

Page 12 of 50

Continuation: MS-09 Linear Programming Objective: Maximize revenue Minimize cost and expenses

Maximize Net Profit!

1. Objective Function 2. Identify Constraint Function 3. Optimal/Product Mix a. Substitution b. Test Coordinates

MS:10 Capital Budgeting 3 Factors a. Net Investment b. Cost of Profit c. Net Returns

1. Net Investment Cost Cash Out xxx

Savings Cash In xxx (xxx) -Tax on Gain -needed working capital xxx -Tax loss/ tax shield xxx

xxx 

-

Accrual xxx Net Income

―Net Investment‖ 

Cash

Cash in xxx - Cash out (xxx) Net Cash Flows

2. A. Operating Income (EBIT) Interest % EBT Tax % NIAT Preferred Div (amount) NI – C/S

xxx (xxx) xxx (xxx) xxx (xxx) xxx

EPS = Ny – Preferred Div. Wtd Average C/S Outstanding 10. Capital Budgeting 11. Financial Management 12. Financial Statement Analysis

Page 13 of 50

2. Cost & Capital

Borrowed Capital

A

CA

NCA

Inventory Capital

L

Interest 5% x 80% = 4%

E

Dividends 10% x 20% = 2% 6%

1. MV over BV 2. Effective Rate over Nominal Rate

Sources: Debt: Yield Equity: (P/S) (C/S) = Rf+b(Rf-km)

Div Yield = Div/Share MP/Share WACC = is minimum acceptable rate of return, desirable rate of return

Bail-Out ―Payback Period‖ Year 1 2 3 Net Investment xxx xxx xxx Cash Flow xxx Salvage Value xxx

Decision Rules Acceptable 

PB Period < Standards of Industry Life ÷ 2



ARR > Cost of Capital

Note: You always consider of disposing the asset at your end. [The same as payback period] Adjust cash flows only] Net Returns

* Net Cash Flow = Ny + Dep‘n.

Sales - VC

* Net Investment = ―PB period‖ – ―Liquidating Concern‖ Net Cash Flows

CM - F x C (cash)

* Net Income = ARR Net Investment

– ―Profitability Concern‖

- Dep‘n Profit - Tax Ny

Average Investment = = NI Average Investment AI= Cost + SV/2

Page 14 of 50

Original Investment = = NI Original Investment

Capital Budgeting with consideration of Time Value Method

1. IRR to solve Cost of Investment Ordinary PVF % =

 

NPV = PV of Cash Inflow – PV of Cash Outflow PI = PV of Cash Inflow ÷ PV of Cash Outflow

Annual Cash Flow 2. Trial and Error on choices available

IRR = PV of Cash Inflow = PV of Cash Outflow Decision Rules IRR = NPV = O 

PB pd ≤ 1. Industry Std 2. life ÷ 2



ARR

*Computation of Effective Rate 

NPV Index = NPV ÷ Investment

Payback Reciprocal

≥ Cost of Capital

*Non Discount Method

PB pd = Payback Period life 1. PB pd ≤



2 2. Cash Inflow – Uniform





NPV

≥ 0 <



PI

≥ 1 <

> Cost of Capital < *Discount Methods 

↑IRR = ↓ PVF ↓IRR = ↑ PVF

Page 15 of 50

IRR

MS: II Financial Management Baumol Model (William) Cash Management

Optimal Cash

Cash Management Strategies 1. Accelerating Collection (Lockbox System)

²(Annual Cash Requirement)

(Cost Per Transaction)

Balance (OCB)

Opportunity Cost of

Holding Cash

2. Slowing Disbursement (Playing Floats)

Total Cost of Cash Balance = °Holding Cost +°° Transaction Cost

3. Redding Precautionary (Zero Balance Accounts) Idle Cash

°Holding Cost = Average Cash Balance x Opportunity Cost Concept of Float Average Cash Balance = Optimal Cash Balance ÷ 2 °°Transaction Cost = No. of Transactions x Cost per Transaction

1. Types of Float 2. Positive Float (Disbursement) 3. Negative Float (Collection)

Number of Transaction = Annual Cash Requirement ÷ OCB

-

Mail Float – Customer payments mailed but not yet received by seller.

-

Processing Float – Customer payment received by the seller but not yet deposited.

-

Clearing Float – Amount of customers’ check that have been deposited but have not cleared yet.

Cash Conversion Cycle

Average Age Inventory Average Collection Period

xx xx

Operating Cycle Average Buyout Period

xx (xxx)

Cash Conversion Cycle

xxx

Page 16 of 50

Accounts Receivable Management

6. Manufacturing Resource Planning (Various Areas) 7. Enterprise Resource Planning (All Functional Areas) 8. ABC Classification System

1. Credit Selection and Standards 2. Credit Terms 3. Collection and Monitoring Program

1. Credit Selection and Standards Short-Term Credit Financing     

Character Capacity Capital Conditions Collection

-

A. Aggressive Financing Strategy B. Conservative Financing Strategy

2. Credit Terms     

Working Capital Financing Policies

C. Maturity Financing Strategy (Semi- Aggressive/ Semi – Conservative)

Cash Discount Credit Analysis Collection Cost Bad Debts Losses Financing Cost

D. Matching Policy (Self Liquidating) Total Financing Requirement

Inventory Management 1. Just-in-Time (JIT) Production System 2. Fixed Order Quantity System 3. Periodic Review / Replacement System 4. Optional Replenishment System 5. Material Requirement Planning (Demand Forecast)

Page 17 of 50

-

Permanent Financing Requirement (Minimum Operation Requirement) - Fixed long term assets

-

Temporary Financing Requirement (Seasonal Operation Requirement) - Permanent current assets

Factors of Considerations in Selecting Sources of Short-Term Funds 

Cost

  

Discounted Interest

Sources of Short-

Term Funds

Availability Credits Influence Requirement Credits

Cost =

- Unsecured

FV – Interest

Discounted Interest Cost = FV – Interest – CB

- Secured Loans - Banking Interest + Issue Cost Cost of Commercial Paper = FV – Interest-Issuance Cost

Cost of Short-Term Credit -

Cost of Trade Credit with Supplier

Discount Rate

Cost =

Long-Term Financing Decision   

360

x 100% - DR %

Credit Paid – Disc.

A

LTFD Capital Structure Financial Structure

Period Capital Structure = Financial Structure (Total Assets) – Current Liabilities

-

Cost of Bank Loans Effective Annual Rate

W/o compensating balance Not Discounted

Not Discounted

Interest Cost =

Required Increase in Assets (Asset/Sale)

with compensating balance

Interest Cost =

Amount Received

→

in Sales x

Structure Increase in Liabilities → (Liabilities/Sale)

in Sales x

Increase in R.E Additional Fund Needed

FV – Compensating Bal.

Page 18 of 50

L AFN RE

Concept of Leverage DOL = CM or EBIT DFL = EBIT or EBIT-Interest

DL = ∆% in EBIT ∆% in Sales DPL = ∆% in EPS ∆% in EBIT

* Deduct Preferred div. (before to) From EBIT, if my. DTL = CM EBIT- Interest

or

DFL = ∆% in EPS ∆% in Sales

DTL = DOL x DFL Cash Break Down Point CBP units = FC – Dep‘n CM/unit

Page 19 of 50

Financial Statement Analysis

Ratio Used to Evaluate Long-Term Financial Position/Stability Fixed Assets

Fixed Assets to Total Equity = Total Equity

Fixed Assets (NET)

Fixed Assets to Total Assets = Total Assets

Net Sales

Sale to Fixed Assets

= Fixed Assets (NET)

CS SHE

B.V/ Share – CS

= CS Outstanding

NIAT Times Preferred Div. Earned

= Preferred Dividend

Total Assets Capital Intensity Rate

= Net Assets

Net Income before tax & fixed changes Times Fixed Changes End = Fixed Changes + sinking fund payment

Page 20 of 50

Test of Over-All Short-term SOLVENCY or Short-term Financial Position

* Working Capital/Turn Over = Net Sales Avg. Working Capital * Diffusion Interval Ratio = Current Liabilities Cash & Cash Equivalent * Payable Turn Over = Net Purchases Avg. Asset Payable * Fixed Assets Long-term Liab = Fixed Assets Long-term Liabilities

Ratios Indications of Income Position

* Rate of Return on Avg. Current Asset = Income Avg. Current Assets * Operating Profit Margin = Operating Profit Net Sales * Cast flow Margin = Operating Cash Flows Net Sales

Page 21 of 50

(personal notes of grr-quash2) Management Advisory Services Sequence of topics (Accounting 8n) 4. Managerial Accounting 5. Cost Volume Profit & Break-Even Analysis 6. Standard cost & Variance Analysis 7. Variable & Absorption Costing 8. Differential Cost Analysis 9. Pricing Decisions 10. Responsibility Accounting 11. Budgeting 12. Financial Statement Analysis 13.Capital Budgeting Managerial Finance ( Finance 3,4&5) 1. The role & Environment of Managerial Finance ( Chapter 1) 2. F/S & Analysis (Chapter 2) 3. Cash Flows & Financial Planning (Chapter 3) 4. Time Value of Money (Chapter 4) 5. Working Capital & Current Asset Management (Chapter 14) 6. Current Liabilities Management (Chapter 15) 7. The Cost of Capital (Chapter 11) 8. Capital Budgeting Cash Flows (Chapter 8) 9. Capital budgeting Technique (Chapter 9) 10. Hybrid & Donatives Security (Chapter 16) [including Chapter 17] Page 22 of 50

11. Leverage & Capital Structure ( Chapter 12)

COST-VOLUME-PROFIT & 5 BREAK-EVEN ANALYSIS SALES (Units x Sp per Unit) Less: Cos Gp Less: Operating Expenses (Selling & Administrative Expenses) Profit / less Y = a + bx Where: Y = Total Cost

Fixed Cost

= y=a

A = Total Fixed Cost

Variable Cost = y =bx

B = Variable Cost per Unit

Mixed Cost

= y = a +bx

X = Number of Units

Variable Costing I/S Sales - Variable Cost (Cost & Expenses ) [ Manufacturing , Selling ,Admin] Contribution Margin - Fixed Cost Profit

Break Even Analysis 1. Equation Method Or Algebraic Approach Sales – Variable Cost – Fixed Cost = Profit Sales – Variable Cost + Fixed Cost + Profit Sales = Units x Selling Price per Unit Variable Cost = Units x Variable Cost per Unit Page 23 of 50

CONTRIBUTION MARGIN OR FORMULA APPROACH Sales in units

= Fixed Cost + Profit Contribution margin per Unit

Break over sales in unit

= Fixed Cost Contribution margin per Unit

Contribution Margin

= Sales –Variable Cost

Sales

= Variable Cost + Contribution Margin

Variable Cost Ratio

= Variable Cost Sales

Contribution Margin Ration

= Contribution Margin Sales

Sales

= Variable Cost Variable Cost “Ratio”

Sales

= Contribution Margin Contribution Margin Ratio

Contribution Margin – Fixed Cost = Profit Contribution Margin

= Fixed cost + Profit

Sales

= Contribution Margin Contribution Margin “Ratio”

Sales

= Fixed Cost + Profit Contribution Margin “Ratio”

Break Over Sales in Peso

= Fixed Cost Contribution Margin “Ratio”

BES IN UNITS & BES IN PESOS

Sales in Units

= Fixed Cost + Profit

Sales

= Fixed Cost + Profit CM Ratio

Page 24 of 50

Margin of Safety

- Break – even Sales

= Actual or Planned sales

- Break – even Sales

Margin of Safety Ratio = Actual or Planned Sales

Actual or Planned Sales = Margin of Safety Actual or Planned Sales

MULTIPLE PRODUCT BREAK – EVEN ANALYSIS PROCEDURE: 1.

Contribution Margin per Unit

x

xxx

Sales mix Ratio

x xxx

Composite Contribution Margin or Contribution Margin per Sales 2. No. of Sales =

xx

Total Fixed Cost Composite Contribution margin

MS in Units = Actual Sales – Break even paid Sales SP

SP

= Margin of Safety ( in peso)

CMR 1 FC

2 =

BES IF fc is constant:

3
...