1. Learning Curve
Y = ax^b
Y = cumulative average time per
unit
X = total number of units
A = time taken for first unit
B = index of learning (Log r /
log2 where ‘r’ is the learning rate)
2. ABC
OAR = Total overhead / Total activity
3. Throughput accounting
Return per factory hour =
throughput per unit / product time on the bottleneck resource
Cost per factory hour = total
factory costs / total time on a bottleneck resource
TA ratio = return per factory
hour / cost per factory hour
4. Ratios
Current ratio = current assets /
current liabilities
Quick ratio = current assets
(excluding stock) / current liabilities
Asset turnover = turnover /
capital employed (TALCL)
ROCE = (profit from
operations/net assets) x 100%
Profit margin = (profit from
operations/total turnover) x 100%
Contribution to sales ratio =
contribution per unit / unit SP or total contribution/total revenue
ROI = Divisional profit – (investment x cost of
capital)
EVA = Economic profit (net
operating profit after tax) – capital charge (net assets x cost of capital)
5. Investment
Appraisal Techniques
PV = FV x [1/(1+r)^n]
Annuity = P x {[1-(1+r)^-n/r]}
Perpetuity = P/r
ARR = annual profit average /
average value of investment or average annual profit / initial investment
IRR = L + (NL / NL – NH) x (H-L)
MIRR = {(Terminal value of
inflows / PV of outflows) ^1/n} – 1 where ‘n’ represents the number of future time
periods
Sensitivity analysis = NPV / PV
of flow considered x 100%
Profitability index for
capital rationing, NPV / capital required in time restricted period
6. The Pricing
Decision
MR = MC
P = a – bq
MR = a – 2bq
P = price
Q = quantity demanded at that price
A = theoretical maximum price
B = change in price / change in quantity
7. Pricing
Full cost price = total budgeted factory
costs + mark-up on costs budgeted volumes
Marginal cost plus = variable cost + %
contribution margin
Perfectly competitive market, TP = market
price - any small adjustments
Spare capacity, TP = MC - any small
adjustments to MC
No spare capacity, TP = MC of product being
transferred + opportunity cost (lost contribution) of product being sacrificed
- any small adjustments
8. Expected Values
EV = Sum of px
X = future outcome
P = the probability of outcome
occurring
