Equations Seminar 1- Seminar 8

Question 1

S1: selling price per unit and cost per unit

Answer 1

Selling rice per unit= cost per unit profit mark up
Cost per unit = direct + indirect costs / number of units

Question 2

S2: how to calculate OAR

Answer 2

OAR= total overhead costs/ allocation base

Question 3

S3 calculate high low method

Answer 3

Variable cost per unit= (cost at high level - cost at low level)/ (high level activity- low level activity)
Fixed cost= cost at high level -( variable cost per unit x high level activity)

Question 4

S3: calculate marginal costing and average costing ?

Answer 4

MC= direct materials + direct labour + variable overheads
AC= direct material + direct labour + overheads

Question 5

S3: calculate less closing stock - mc and less closing stock - AC

Answer 5

MC x ((units - units sold)/units)
AC x ((uints -units sold)/units)

Question 6

S4: the equation for break even analysis

Answer 6

Contrition per unit= selling price - variable cost
Profit= ( contribution per unit x number of items sold) - fixed cost
BEP= fixed cost/ contribution per unit
MOS= (current output - break even output)/ current output x100

Question 7

S5 : calculate ARR

Answer 7

ARR= annual profits/ average investment
- annual profits= total profits/ number of years
- average investment = ( initial investment + residual value)/2

Question 8

S5: calculation for cash flow and depreciation

Answer 8

Cash flow= annual profit + annual depreciation
Depreciation = ( initial investment - residual value)/number of years

Question 9

S5: calculation for payback period

Answer 9

How long it takes to payback initial investment
((Initial investment - cumulative cash flow in year before recovery)/ cash flow in recovery year) x12

Question 10

S5: calculation for NPV and IRR

Answer 10

NPV=+{(Ct x discount factor) - Co
IRR= r1+[(NPV1-(NPV1-NPV2)) X (r2-r1)]

Question 11

S6: calculate terms of rights issue?

Answer 11

New shares = funds to raise/rights issue price
Existing shares/new shares = ratio
Ownership shares/ ratio = new shares 2
New shares 2 x rights issue price

Question 12

S6: calculate ccc

Answer 12

Inventory days + trade receivable date - trade payable days

Question 13

S8: calculate WACC

Answer 13

( (ordinary shares +reserves/ordinary shares + reserves + debentures) x cost of equity) + ( (debenture stock / v ) x cost of debt)