lOMoARcPSD|32210586

2. MAS Formulas - Quicknotes regarding management

advisory services
Bachelor of Science in Accountancy (Polytechnic University of the Philippines)

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MAS FORMULAS
GATO, Abdul Barri Indol
MSU - Main Campus
09452146094

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COST SEGREGATION TECHNIQUES VARIABLE COSTING FINANCIAL STATEMENT (FS) ANALYSIS

High-Low Method Net Income < Net Income P<S BI > EI CA NI - Preferred Dividends
Abs Var
Current ratio = CL EPS =
Highest Cost - Lowest Cost Wtd. Ave. OS outstanding
VCR = Net Income > Net Income P>S BI < EI
Difference in their units Abs Var
CA - Inventories PPS
Quick ratio = P-E ratio =
Note: basis in selecting the highest and lowest point CL EPS
is the cost driver (i.e units, hours, etc) in income = [( in inventory) FxOH rate] DPS
IS-related account Dividend payout = EPS
TFC = TC - TVC ÔxÕ turn-over = Average of X
Scattergraph Method COST VOLUME PROFIT (CVP) ANALYSIS DPS
Age of ÔxÕ = 360 PPS
- plot the given points in a graph and correlate ÔxÕ turn-over Dividend yield = Dividend
FC + NI
in units = BT
PR
Least-squares Method Required CMU MSR = CMR X to Y ratio = X/Y Payout
sales P-E ratio
y = a + bx in pesos = FC + NI Net Income
BT
CM Return on ÔxÕ = Plowback ratio = 1 - Dividend
CMR x
Y = na + b X EBIT Payout
x
2
FC ÔxÕ margin = Net Sales Assets
XY = Xa + b X Sales = 1 Equity Multiplier =
CMR - PR DOL = MSR Ordinary SHE
CoefÞcient of Correlation (r) DSO = Average Receivables Capital Intensity ratio
Total FC Average Sales per day
- measures direction of relationship in units = CMU % NI Assets
BT
EBIT =
% Sales TIE ratio = Net Sales
CoefÞcient of Determination (r ) 2
BEP Interest Expense
Total FC Defensive Interval ratio
- measures strength of relationship in pesos =
CMR Indifference Point ROA Current Liabilities
- goodness of Þt (-1.00 to +1.00) ROE = 1 - Debt ratio = Cash & Cash Equivalents
FC FC - FC
Composite BEP = WaCMU = A B

CMR - CMR A B Liabilities

Liabilities
Assets Debt-Equity ratio =
Standard FxOH rate Debt ratio = Equity
WaCMU = (CMU x Sales Mix
ratio in units) Budgeted FxOH 1 - (ROA/ROE) EBIT
= Normal Capacity BEP ratio =
Assets
WaCMR= (CMR x Sales Mix Equity
ratio in pesos) Equity ratio = Assets

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VARIANCE ANALYSIS
'
SALES VARIANCE

Sale Price Variance (SPV) COST VARIANCE

Sales Mix Variance (SMV)
Sales Volume Variance (SVV) Direct Materials Multi-variances (DM & DL)
Sales Quantity Variance (SQV) AP x AQ MPV - for multiple inputs to one product
SP x AQ MQV
Market Share Market Size SP x SQ MPV/LRV Actual Costs
Actual Input @ Std Price/Rate
Variance Variance MMV/LMV Actual Input (AI) @ SIC
Direct Labor MYV/LYV Actual Output (AO) @ SOC
Sales CM AR x AH
Volume Mix CM
A x A
SPV SR x AH LRV SIC =
Total Standard Costs
A x B A x A x A SPV LEV Standard Inputs
SR x SH
B x B SVV A x A x B
A x B x B SMV SOC =
Total Standard Costs
B x B x B SQV Standard Production
Market Market Ave
Size (u) Share (%) CMU Overhead
A x A x B A: Actual 1) 2-way 2) 3-way
MShareV
A x B x B B: Budgeted
MSizeV S AFOH
B x B x B Con AFOH BAAH
BASH Va BASH = BFxOH + (SH x SVR)
Vo SHSR BASH
GROSS PROFIT VARIANCE Vo SHSR BAAH = BFxOH + (AH x SVR)
2-way - for one product 3) 4-way BFxOH = NH x SFxR
Variable component Fixed Component SFxOH = SH x SFxR
SPV SP x Current Unit Sales
Sales Variance AVOH SH = Actual units x SH/unit
SQV Unit Sales x Previous SP Var Sp Fx Sp AFxOH
AH x SVR BFxOH
Var Eff SH x SVR Vo
Cost Variance CPV UC x Current Unit Sales SFxOH
CQV Unit Sales x Previous UC
GP Variance

4-way - for multiple products

1) PRICE VARIANCE - computed same way in 2-way
2) SALES MIX VARIANCE
Current Sales A: Current Unit Sales x Prev. GPU
@ Previous GP/unit B: Current Unit Sales x Prev. GPU
Current Sales Current Unit Sales of A&B
@ Previous Average GP/unit x Prev. GPU
3) SALES YIELD VARIANCE
Current Sales - Previous Gross ProÞt
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RESPONSIBILITY ACCOUNTING & TRANSFER PRICING

Contribution Margin X
Less: Controllable FC X
Controllable Margin X QUANTITATIVE TECHNIQUES
Less: Direct, Non-controllable FC X
Segment Margin X Cost of perfect Expected CM Expected CM
= given perfect info - (best action without perfect info)
Operating Income (if segment) information
Income Net Income (if whole company)
Investment Base Project Evaluation and Review Technique (PERT)
ROI =
DuPont
Model ROS X ATOR Estimated Project T + 4T + T
= Opt Likely Pess

Completion Time 6
Income X Sales
Sales Average Assets Exponential Smoothing
Smoothing
Operating or - Desired Income Constant
Residual Income =
Segment Margin (% x Base)
BT New forecast = (Actual x a) + [Old Forecast x (1-a)]

EVA = Operating ProÞt - Desired Income

before interest
but after taxes (WACC x Base)
ECONOMICS
Equity Spread = SHE, beg X (ROE - Cost of Equity Capital)
Consumption, A - Consumption B
NI/SHE, beg
Marginal propensity to consume = Income Level, A - Income Level B
MVA = ( in MV X OS Outstanding) + in SHE
Savings
Average propensity to save = Income
ShareholderÕs in stock price + Dividend/share
return = Initial Stock Price
Minimum = Variable Costs + Opportunity Costs
Transfer Price
Regular VC Regular CMU X Lost Sales (unit)
- Avoidable VC Units transferred to buying division

MCE rate = Process Time = Process Time

Throughput Time Process + Wait + Move + Inspection
# of units in a process
Manufacturing Velocity =
Production rate

Delivery cycle = Order Placement (day) - Shipment to Customer (day)

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RELEVANT COSTING
MAKE OR BUY DECISION SELL AS-IS OR PROCESS FURTHER
Costs to Make Costs to Buy Incremental Sales
(SP - SP )
Processed Split-off X
DM + DL + VOH/u Purchase Price/u Incremental Var Costs X
Avoidable FxOH/u X # of units Costs of separate processing X
Total Avoidable Cost/u Relevant Costs to Buy Incremental ProÞt X
X # of units Less:
Relevant Costs to Make Savings from parts bought SCARCE RESOURCES
Rental Income, released space
CM from new product (SP - VC)
= CMU per scarce resource
Scarce resource needed
INDIFFERENCE POINT per unit of output
Difference in total FC
in units = SHUTDOWN OR NOT
Difference in CMU
Difference in total FC Loss from VS Shut-down Costs
in pesos = Difference in CMR continuing operations

CONTINUE OR DROP A SEGMENT Shutdown FC - FC

=
Regular During shutdown

point CMU
Contribution Margin X
Less: Avoidable Fx Controllable Expenses X SCRAP/REWORK OF A DEFECTIVE UNIT
Relevant Segment Margin X Incremental revenue from reworking X
Incremental costs from reworking X
SPECIAL ORDER Incremental proÞt from reworking X
Incremental Sales X Less: Incremental proÞt from selling scraps X
Incremental Costs X Advantage / Disadvantage X
Incremental ProÞt X
CM (pesos) of
Less: Opportunity Costs X Units that can be lost @ regular SP special order
Advantage / Disadvantage X before a decision become unwise = CMU of regular order
that could be lost
SELL NOW OR LATER
(SP - SP ) - Incremental Costs
Now Later

= Advantage / Disadvantage

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CAPITAL BUDGETING
COST OF CAPITAL PROJECT EVALUATION TECHNIQUES
Total Interest S
Cost of Investment
SH FLOW
Total Debt EVEN CA
Annual even cash inßows
Payback period UN-E
VEN CA
SH FL
OWS

r= Net Borrowing Costs

X (1-Tax%) # of yrs prior full recovery Unrecovered cost, start of yr
d
Net Proceeds +
(manual count) Cash ßow during recovery yr
Nominal IR X Face Value, bond X (1-Tax%)
MV of bonds X (1-Flotation %) Cumulative discounted CF @ Yr X
Discounted payback = Yr X + Discounted CF @ Yr X + 1
Dividend per share 1
r= P
P
n 1
Payback reciprocal =
Payback Period
DCF = Dividend per share 1

P Net ProÞt
ARR = Orig or Ave Investment
0

r=
S
CAPM = r + (r - r )b
RF m RF i

Bond yield DeÞcit - Residual Value that yr

Payback bailout = Recovery yr +
+ risk premium CF that yr
If no risk premium, use 4% (judgmental RP)
NPV = PV of future Cash Inßows - COI
r = Dividend per share 1 + g
e
Pn NPV
NPV Index = COI
Pn = P - Flotation Costs - Stock underpricing
PV of CI
Addition to RE for the yr ProÞtability Index = COI
RE Breakpoint =
Ordinary SHE in capital mix (%)
IRR = NPV is @ ZERO or ProÞtability Index is @ 1
Financial Breakpoint = Funds available
Financing mix ratio (%) Horizon / Market Value FCFW+1

of stocks = WACC - g FCF

Growth Rate = ROE X Reinvestment % Levered
beta

1 - Payout %
Hamada Equation: b = bu [1+(1-T)(Debt/Equity)]
Unlevered
beta

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WORKING CAPITAL MANAGEMENT INVENTORIES

D/Working Days
CASH 2DO
EOQ = TOC = # of orders X EOQ LTU = NU X NLT
2 X Annual Cash Demand CC
X Cost per Transaction D Ave. Inv X CC (MU - NU) X NLT
Optimal Cash Balance = Optimal # of Orders = EOQ TCC =
Carrying Cost rate (%) SS =
(EOQ/2) X CC (MLT - NLT) X NU
OCB Cash Fx Costs ROP = (LTU + SS) or (NU x MLT)
Ave. Cash Bal = Cash Breakeven = CMU
2 Complex Problems
AD Ave. Cash Bal 1) Finding the Optimal Level of Inventory
# of cash transfers = Opp Costs (%) =
OCB Carrying Cost % - of all given levels, look for the LEAST TOTAL STOCKOUT COSTS (SC)
Holding Costs = Ave. Cash Bal X Opp Costs (%) Total SC = Cost of carrying SS + Cost of SC occurences
# of orders X Probability %
Transaction Costs = # of Transfers X Cost per transaction Cost of SC occurrences = Stockout Cost X
per occurence per yr of occurence
Inventory = 360 Payable Payment 360 2) EOQ with Variable Quantity Discounts
Conversion Period Inventory T-O = Payable T-O
Period
- Þnd the LEAST TOTAL COST (total relevant inventory costs or TRIC)
Receivable = 360 - compute TRIC for every other inventory level
Conversion Period Receivable T-O CCC = ICP + RCP - PDP
TRIC = OC + CC + Cost of materials
D X Cost per unit X (1-Disc %)
ACCOUNTS RECEIVABLE
CHANGE IN CM Savings from trade discount
(Optimal Inventory X Cost/unit X Disc %)
Net (dis)advantage =
in credit sales X CMR X - Increase in TRIC
(TRIC, optimal inv. - TIC, under EOQ)
COSTS
1) Collection Cost = in credit sales X CollÕn % X ACCOUNTS PAYABLE
2) Capital Cost = Ave. Receivables X Opp. Cost % X Regular IR = Interest / Borrowed Amount
3) Discount Cost = Credit Sales X Discount % X Cost of
X Discounted IR = Interest / (Borrowed Amount - Interest)
4) Default Cost = Credit Sales X Doubtful % X Bank Loans
Net ProÞt realized X Effective IR = Interest Expense - Interest Income on compensating bal
Loan amount - Discounted Interest - Compensating bal
Annual cost of factoring Compensating bal = required comp. bal - usual com. bal
Annual Cost of Financing = Net Proceeds
AR factoring

Annual Factor Fee Nominal Annual Cost Disc % 365

+ Annual Interest Gross loan amount
of trade credit = 1 - Disc % X Days credit outstanding - Disc period
- Collection Savings - Reserve
- MONTHLY factor fee If deducted
in advance
- MONTHLY inteest

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