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MBA A4M Session 7 Oct 7 Slides

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25 views21 pages

MBA A4M Session 7 Oct 7 Slides

Uploaded by

deepakcool208
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MBA Accounting for Managers

Session #7

Prof. Claudia Sonz Roehl


October 7, 2024
Agenda
• Announcements
• Team Presentations 1-6
• Break (10 minutes)
• Cost estimations and behavior
• Introduction to CVP Analyses, including
applications
• Next steps…
Presenting Today:
Team #1: 23andMe Board Resigns in New Blow to DNA-Testing
Company and CEO Anne Wojcicki

Team #2: The Clean Jet Fuel Technology Winning Over Wall Street

Team #3: EA Shows Why Game Forecasts Are a Tricky Business

Team #4: Prager Metis to Resolve SEC Fraud Charges Over


Bankman-Fried’s FTX Audits

Team #5: Axel Springer Strikes Deal With KKR to Split Up


Publishing

Team #6: Lumen Technologies Bets on AI Deals to Turn Its


Finances Around
Understanding Costs are critical
• Four key questions:
• What did it cost and why?
• What should it have cost?
• How can we improve?
• What is our next strategic move?
• Budgeting and forecasting the company’s financial future
Types of Business Entities (some may be more than 1):

 Manufacturing: convert materials to a finished product


through the use of machinery and/or labor.

 Merchandising: purchase finished products from a


manufacturer and then sell the product to a customer.

 Service: neither make nor sell a tangible product.


Sold (C/G/S)

Ending Inventory
Cost Behavior matters also
Relevant Range is the range of activity where the following remain constant:
Total fixed costs and Variable cost per unit

Response in Total Response per Unit


Cost to Changes in to Changes in
Classification Activity Levels Activity Levels
Variable Costs Change No change
Fixed Costs No change Change
Mixed Costs Change Change
Cost- Volume-Profit (“CVP”)
A technique to examine the relationships among
total volume of an independent variable,
total costs, total revenues, and profits for a
time period.
Total Cost Equation =
Total Fixed Costs + (Variable Costs per Unit x
Number of Units)

a+
Y=X
b
Methods of estimating fixed and variable cost components
 High-low method
 Scatter diagrams
 Least-squares regression analysis (easy to do in Excel)

Total Cost Equation: Y = $2.20X + $6,080


For example…
Evaluate each cost as fixed, variable, or mixed:

Number of Ice Cream Cones Sold 3,200 3,400 3,600


Cost of ice cream and cones $3,840 $4,080 $4,320
Utilities $800 $800 $800
Employee payroll $960 $1,020 $1,080
Advertising $1,600 $1,800 $2,000
 A variable cost varies in total but is fixed per unit.
 A fixed cost is fixed in total but varies on a per unit
basis.
 A mixed cost has both fixed and variable components.
 Recall, the Cost equation = Fixed costs + Variable costs
Rent Revenue $326,350 $310,500
Variable Costs:
Var. Property Maintenance $65,270 $62,100
Other $8,159 $7,763
Total Variable Costs $73,429 $69,863
Total Contribution Margin $252,921 $240,637 77.50%
Fixed Costs:
Fixed Property Maintenance $48,000 $48,000
Real Estate Taxes $50,000 $50,000
Property Management $50,000 $50,000
Depreciation $100,000 $100,000
Total Fixed Costs $248,000 $248,000
Net Operating Income $4,921 ($7,363)
Fixed costs
Break Even in # of Units =
Unit contribution margin

Fixed costs
Break Even in Sales $s =
Contribution Margin Ratio

Fixed costs + Desired profit


=
Unit contribution margin
OR Contribution Margin Ratio
Halloween Company
Income Statement
For the Month Ending September 30, 2024
Sales (30,000 units) $300,000
Cost of goods sold:
Direct materials $30,000
Direct labor 22,500
Variable manufacturing overhead 18,750
Fixed factory overhead 20,000 91,250
Gross profit $208,750
Selling and administrative expenses:
Variable $ 3,750
Fixed 10,000 13,750
Net income $195,000

Per Unit variable costs = $1 (materials) + $0.75 (labor) + $0.625 (V. overhead) + $0.125 (V. selling and admin)
= $2.50

Contribution margin per unit = $10.00 (Sales price) – $2.50 (variable costs) = $7.50

Fixed costs = $20,000 (factory overhead) + $10,000 (S&A) = $30,000


Break-even = $30,000 (fixed costs) / $7.50 (contribution margin) = 4,000 units
Break-even in Sales Dollars = $30,000 / .75 = $40,000
Presenting on October 9th:

Team #7: Nintendo and Pokémon Sue Palworld Maker for Patent Infringement

Team #8: Small Businesses Make Hard Choices as Insurance Costs Surge

Team #9: China Fines PwC $62 Million for Botching Its Work for Evergrande

Team #10: Microsoft Boosts Dividend, Authorizes Buyback of Up to $60

Team #11: Topgolf Callaway Brands Intends to Split Into Two Companies
Presentation Protocol for the Audience
• Teams have worked very hard on their
presentations and they deserve our full
attention and respect.
• When a presentation starts, those of us in the
audience will not use or have electronics open,
may not speak to others, and/or not leave or
enter during the presentation.
• Discussions about all the presentations will be
at another time.
• Presentation content will not be assessed in
the course’s Final Assessment.
• Focus on being an active listener
Next steps…

• MBC Assignments 5 & 6 are available and


due by the end of October 19th

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