FINANCIAL ANALYSIS

Managing Financial Principles and Techniques

Name of Writer

Name of Institution

Table of Contents

A.C. (1.1)4

A.C. (1.2)5

Step 1:5

Step 2:5

A.C. (2.1)7

Forecasting7

Econometric predicting methods7

Simulation7

Cash Circulation Predictions7

A.C. (3.1)8

A.C. (3.2)9

Sales Budget:9

A.C. (3.3)9

Production Budget:9

A.C. (3.4)10

A.C. (4.1) & A.C. (4.2)11

A.C. (5.1)12

A.C. (5.2)13

Payback Period13

Advantages:13

Disadvantages:13

Net Present Value14

Advantages:14

Disadvantages:14

Internal Rate of Return14

A.C. (5.3)15

A.C (6.2)16

A.C. (6.1)17

A.C. (6.3)17

References19

Managing Financial Principles and Techniques

A.C. (1.1)

Cost is the key to pricing because it can quite often decide the revenue advantage which adds up to form the cost of the product. So, you would usually here the term Cost Cutting when it comes to large companies to increase the revenue edge but when pricing considerably go up they do effect the cost of the product but usually companies would like to keep the cost continuous when there are slight improvements on cost.

In business, the cost may be one of purchase, in which situation the cash used up to obtain it is mentioned as cost. In this situation, cash is the feedback that is gone in order to obtain the thing. This purchase cost may be the sum of the cost of development as received by the unique manufacturer, and further expenditures of transactivity as received by the acquirer over and above the cost paid to manufacturer. Usually, the cost also includes a mark-up for profit over the cost of development.

Manufacturing cost are those expenditures that are immediately involved in developing of products. Illustrations of developing expenditures include raw components expenditures and costs related workers.

1.Manufacturing cost is separated into three wide categories:

•Direct Manufacturing cost

•Direct Labor cost

•Manufacturing Overhead cost

2.Non-manufacturing Prices are those expenditures that are not immediately received to produce a product.

Examples of such expenditures are wage of sales employees and advertising expenses.

Generally non-manufacturing expenditures are further categorized into two categories:

•Marketing and Selling Costs.

•Administrative Costs.

A.C. (1.2)

Step 1: Select the highest and lowest activity levels and their associated costs (Activity level should be selected not the highest and lowest cost).

Step 2: Find the variable cost per unit.

Formula:

Variable cost per unit = Cost at the high level of activity-cost at the low level of activity

High level of activity- low level of activity

Solution to the case

a) Finding variable cost per unit

Variable cost per unit = (9,000-7,000) = 10 per unit

(400-200)

b) Finding fixed cost per unit

Total fixed cost by substituting at high activity level:

Total cost 9,000

Total variable cost (400x10)= (4,000)

Therefore fixed cost = 5,000

c) Total cost if output is 350 units

Variable cost 350 x 10= 3,500

Fixed cost 5,000

Total cost 8,500

d) Total cost if output is 350 units

Variable cost 600 x 10= 6,000

Fixed cost 5,000

Total cost 11,000

Steps involved in Developing ABC Costing method:

STEP 1: Determined total the major actions.

STEP 2: Established the primary source regularly.

STEP 3: Gathered cost car owner information, allocated expenditures to each action, and measured payment per result.

STEP 4: Examined procedures with expenditures, results, and standards.

STEP 5: Determined additional boosting possibilities.

The style of an Activity Based Costing system is a several further challenging process that needs the cooperation of many different good brings management of a company. To simply fight the level of the overall action car proprietor protected ...