o Limiting Factor analysis

1) Identify limiting factor ( total requirement > total availability )

Expected demand *limiting factor (like material, labor etc)
If availability given material, labor hour and machine hour
!han "e calculate all and #nd "hich one i limiting factor (like material
and labor etc)
$) %ontribution per unit & ale price ' variable cot
(ariable cot & direct material ) direct labour )variable overhead
*) +imiting factor per unit & (given in quetion)
,) %ontribution - limiting factor per unit & contribution per unit - limiting
factor per unit
.) /anking & baed on tep , (higher contribution 1t , then $nd then *rd
)
0) 1ptimal production plan
2) %alculate total contribution 3tep $ * tep 0 ya ( book page 45 tep ,
calculation)
5) !otal pro#t & !otal %ontribution ' 6ll #xed cot- period cot)
o Cost volume proft analysis
%ontribution per unit & ale price per unit 7 variable cot per unit
%ontribution margin ratio(%-3 ratio) & contribution margin - ale * 188
9reakeven point & contribution & #xed cot ("here no pro#t no lo)
9reak even (ale) (6mount) (revenue) & #xed cot - %-3 ratio
9reak even in (unit) (volume) & :ixed cot - contribution margin per unit
3ale 6mount (revenue) & :ixed cot ) target pro#t - %-3 ratio
3ale in unit (volume ) & #xed cot ) target pro#t - contribution margin
per unit
;argin of afety
If actual ale and budgeted ale both given in quetion chooe actual
ale
;argin of afety (in unit ) &budgeted ale unit ' 9reak even ale unit
;argin of afety & budgeted ale ' 9E<
If #nd 9E< & ;137 9udgeted ale
o Absorption costing
full production cot & (variable ):ixed )
=irect material ) =irect labor) (ariable production o-h> ) :ixed
production o-h>
6borption rate & #xed production cot - output unit & #xed production
overhead- output unit
1pening Inventory (full production rate (variable ) #xed)
%loing inventory (full production rate (variable ) #xed)
?nder-over 6pplied & output unit 'budgeted unit
1utput > budgeted it mean under applied (6==)
1utput @ budgeted it mean over applied (+E33)
6borption coting quetion format
3ale AAAAAAAAAAAAAAAAAAABBBBBBBBBBBBBBxxxxx
+eC %ot of 3aleC
6== 9eginning inventory AAAA xxx
3td production cot AABBBBBBBxxx
%ot of good available for ale AAAAAABBBBBBBxxx
+E33 %loing inventoryAAAAAAAABBBBBBBBBB(xxx)
%ot of good old AAAAAAAAAAAAAABBBBBBBBBBB (xxxx)
?nder-(1ver) 6borbed overheadAAAAABBxxxx
Dro <ro#t AAAAAAAAAAAAAAABBBBBBBBBBBBBBBBxxxxx
+e (ariable ale commiion-ditribution
+e :ixed 6dminitration
+e :ixed elling
Eet <ro#t (+o) AAAAAAAAAAAAAABB AAxxxxxx
o Marginal Costing/Direct costing/Variable costing
?e only variable cot of production =irect ;aterial ) =irect labor )
=irect
Expene ) (ariable 1verhead
1pening Inventory (variable production rate)
%loing inventory (variable production rate)
;arginal Fuetion format
3ale AAAAAAAAAAAAAAAAAAAAAxxxxx
(ariable expeneC
6== 9eginning inventory
3td variable production cot
%ot of good available for ale
+e %loing inventory
(ariable cot of good old AAAAAA Axxxx
(ariable elling and adminitrative expene A xxxxx
(ariable ale commiion AAAAAAAAxxxxxx
!otal (ariable expene AAAAAAAAAAAAAA(xxxxxx)
%ontribution margin AAAAAAAAAAAAAA xxxxxxx
:ixed expeneC
;anufacturing-production overheadABBBBBBBBBxxx
:ixed 3elling and adminitrativeAAAA ABBBBBBBBBxxx
!otal #xed expene AAAAAAAAAAAAAAA(xxxxxx)
Eet <ro#t (+o)
o Target costing
!arget cot & target elling price ' target pro#t
!arget cot gap & target cot ' proGected cot (proGect cot given in
quetion)
6borption overhead rate & 9udgeted cot - budgeted activity
?nder or aborbed-applied overhead
6ctual overhead 7 6borbed 1verhead ( 6ctual Hour * 6borption
1verhead /ate)
If 6borbed I ;ore !han 6ctual (1ver 6borbed) 7
If 6borbed I +e !han 6ctual ( ?nder 6borbed) )
o RATIO
Dro pro#t ratio & (Dro pro#t - Eet ale) x 188
Eet pro#t ratio & (Eet pro#t - Eet ale) x l88
1perating pro#t ratio & (1perating pro#t - Eet ale) x 188
Expene ratio & (Individual expene - Eet ate) x 188
1perating (cot) ratio & (1perating cot - Eet ale) x 188
Eet pro#t to net "orth ratio & (Eet pro#t after interet and tax - Eet
"orth) x 188
/eturn on capital employed (/1I) & (Eet pro#t before interet, tax -
%apital employed) x 188
Earning per hare & net pro#t available for equity hareholder - Eumber
of equity hare
=ividend per hare & =ividend amount - Eumber of equity hare
%apital employed turnover ratio & %ot of ale - %apital employed
:ixed aet turnover ratio & %ot of ale or ale - :ixed aet
Iorking capital turnover ratio & %ot of ale or Eet ale - Eet "orking
capital
Inventory turnover ratio & %ot of good old - 6verage inventory
=ebtor (receivable) turnover ratio & 6nnual net credit ale - 6verage
account receivable
=ebtor (receivable) collection period & 6ccount receivable - Eet credit
ale per day
%reditor turnover ratio & Eet credit purchae - 6verage creditor
6verage credit period & 6verage account payable - Eet credit purchae
per day
%urrent ratio & %urrent aet - %urrent liabilitie
Fuick ratio-6cid tet ratio & Fuick aet - %urrent liabilitie
=ebt Equity /atio & !otal long term debt - hareholderJ fund
=ebt to net "orth & !otal long term debt - 3hareholderJ fund
External7internal equity & External equity - Internal equity
=ebt vB fund & total long term debt - !otal long term fund
=ebt ervice ratio & Earning before interet and taxe - :ixed interet
charge
:ixed aet ratio &Eet #xed aet - +ong7term fund
3olvency (debt to total fund) ratio & !otal liabilitie - !otal aet
/eerve to capital ratio & /eerve - %apital
%apital gearing ratio &Equity - :ixed interet hearing ecuritie
<roprietary ratio & <roprietorJ fund - !otal aet
a!otal 6et 7 %urrent liabilitie & capital employed