Tax 35%

Ft. Meyers Spa Scottsdale Spa

Operating income $ 1,220,000.00 $ 1,190,000.00
Less:
AOA $ 6,155,000.00 $ 6,312,000.00
min. ROI 11% 11%
$ 677,050.00 $ 694,320.00
RI $ 542,950.00 $ 495,680.00

NOPAT $ 553,800.00 $ 503,100.00

Less: Cost of capital
BV of Capital $ 5,825,000.00 $ 6,047,000.00
WACC 9.25% 9.19%
$ 538,562.86 $ 555,923.94
EVA $ 15,237.14 $ (52,823.94)

Ft. Meyer's
8% After tax Cost of Debt 5.20%
Weight 66% 3.42%

Cost of Capital 17%

Weight 34% 5.83%
WACC 9.25%

1 NOI
Increase in Income
Adj NOI
Less: Adj AOA
AOA, un $ 6,155,000.00
Add'l sa $ 225,000.00 $ 6,380,000.00
Min. Return 11%
 RI, adj
RI, unadj
Decrease in RI

It will decrease the current RI by $2,750. it will be rejected since it will only resu
the other managers would also reject the project since it yielded a decrease in R
Monterey Spa
$ 1,295,000.00

$ 7,435,000.00
11%
$ 817,850.00
$ 477,150.00

$ 555,750.00

$ 7,351,000.00
8.98%
$ 659,954.43
$ (104,204.43)

Scottsdale Spa Monterey Spa

5.20% 5.20%
66% 3.44% 68% ###

17% 17%
34% 6% 32% 5.44%
9.19% 8.98%

$ 1,220,000.00 Increase in NOI $ 22,000.00

$ 22,000.00 Less: Increase in $ 225,000.00
$ 1,242,000.00 min. ret 11% $ 24,750.00
Decrease in RI $ (2,750.00)

$ 701,800.00
 $ 540,200.00
$ 542,950.00
$ (2,750.00)

rejected since it will only result to a lower RI therefore lower incentive for the manager.
since it yielded a decrease in RI
Required ROI 20%

1
a. Turnover

Cash $ 1,210,000.00
AR $ 630,000.00
Inv'y $ 880,000.00
PPE $ 1,280,000.00
OA, 12/31/17 $ 4,000,000.00
percentage increase over 105%
OA, 1/1/17 $ 3,809,523.81
AOA $ 3,904,761.90 2

TO 1.2293

Margin

Sales $ 4,800,000.00
COGS $ 2,650,000.00
GM $ 2,150,000.00
Selling exp $ 727,000.00
Admin exp $ 402,650.00
Others $ 324,350.00
NOI $ 696,000.00
divide: Sales $ 4,800,000.00
Margin 14.50%

ROI 17.82%

2 Min. ROI 20%

divide: Margin 14.50%
Needed TO 1.38
Orig TO 1.23
Needed Increase 0.15

3
Proposal 1
 Lost Sales $ 500,000.00
GM ratio 35.40%
Savings in OpE$ 40,000.00

Orig NOI
Increase in NOI
Lost GM $ (177,000.00)
Cost Savings $ 40,000.00
Adj NOI
Sales
Adj Margin

AOA
12/31/2017 $ 3,440,000.00
Add: 12/31/18$ 3,440,000.00
$ 6,880,000.00
2
AOA $ 3,440,000.00

Sales $ 4,300,000.00
divide: AOA $ 3,440,000.00
TO 1.25

ROI 16.25%

Proposal 2
Decrease in OA $ 1,000,000.00

Unadj, NOI
Decrease in NOI due to add'l expense
Adj, NOI
divide: Sales
Adj Margin

Sales $ 4,800,000.00
AOA $ 3,000,000.00
TO 1.60

ROI 20.80%
Proposal 3

Unadj, NOI
Increase due to savings in COGS
adj NOI
divide: Sales
Margin

Sales $ 4,800,000.00
AOA $ 4,000,000.00
TO, adj 1.20

ROI 21.60%
b. Residual Income

NOI $ 696,000.00
Less: Min. Require $ 761,904.76
RI $ (65,904.76)
Transferred Assets $ 560,000.00

$ 696,000.00

$ (137,000.00)
$ 559,000.00
$ 4,300,000.00
13.00%

Cash $ 1,000.00 Rent Expense

Eqpt $ 1,000.00 Cash

$ 696,000.00 AOA $ 4,000,000.00

$ (72,000.00) Tramsferred Ass $ 1,000,000.00
$ 624,000.00 Adj AOA $ 3,000,000.00
$ 4,800,000.00
13.00%
$ 696,000.00 AOA $ 4,000,000.00
$ 168,000.00 Debit Cash $ 800,000.00
$ 864,000.00 Credit Eqpt $ (800,000.00)
$ 4,800,000.00 AOA, adj $ 4,000,000.00
18.00%
$ 1,072.00
$ 1,072.00
Budgeted FC
VC/meal

PP%
Budgeted meals
Actual meals

SDC (planning)

FC
VC
TOTAL

SDC (Performance Measurement)

FC
VC
TOTAL
 $ 40,000.00
$ 3.00

AUTO TRUCK
65% 35%
35,000 20,000
20,000 20,000

AUTO TRUCK TOTAL

$ 26,000.00 $ 14,000.00 $ 40,000.00
$ 105,000.00 $ 60,000.00 $ 165,000.00
$ 131,000.00 $ 74,000.00 $ 205,000.00

rmance Measurement)

AUTO TRUCK TOTAL

$ 26,000.00 $ 14,000.00 $ 40,000.00
$ 60,000.00 $ 60,000.00 $ 120,000.00
$ 86,000.00 $ 74,000.00 $ 160,000.00
 A B C
PP %
May 40% 12% 48%
June 50% 20% 30%
Actual Lines of Print
May 80,000 20,000 100,000 200,000
June 75,000 30,000 45,000 150,000
AVC 20% greater than budgeted
FC $ 20,000.00 UNFAVORABLE budget variance

Separate the cost to VC and FC, with te use of High low method

High-Low Method
Cost $ 3,000
Lines of Print 50,000
Actual VC $ 0.06
120%
Budgeted VC $ 0.05

MAY
A B C
Variable Cost
Actual lines 80,000 20,000 100,000
Budgeted VC/u $ 0.05 $ 0.05 $ 0.05
$ 4,000.00 $ 1,000.00 $ 5,000.00

Fixed Cost
Allocated FC $ 60,000.00 $ 18,000.00 $ 72,000.00
Total Cost Allocated $ 64,000.00 $ 19,000.00 $ 77,000.00

JUNE
A B C
Variable Cost
Actual lines 75,000 30,000 45,000
Budgeted VC/u $ 0.05 $ 0.05 $ 0.05
$ 3,750.00 $ 1,500.00 $ 2,250.00

Fixed Cost
Allocated FC $ 75,000.00 $ 30,000.00 $ 45,000.00
Total Cost Allocated $ 78,750.00 $ 31,500.00 $ 47,250.00
 **If purpose is,

Performance measurement Planning

For VC Budgeted VC * Actual Performance For VC
For FC Budgeted FC For FC

May June
Total Cost $ 182,000.00 $ 179,000.00
Actual VC $ 12,000.00 $ 9,000.00
FC, actual $ 170,000.00 $ 170,000.00
(U) variance $ (20,000.00) $ (20,000.00)
Budgeted $ 150,000.00 $ 150,000.00

TOTAL

200,000
$ 0.05
$ 10,000.00

(must be based on peak-period cap)

$ 150,000.00
$ 160,000.00

TOTAL

150,000
$ 0.05
$ 7,500.00

(must be based on peak-period cap)

$ 150,000.00
$ 157,500.00
Budgeted VC * Budgeted Performance
Budgeted FC
REQUIREMENT:
1 Domestic Price of part no. 54
Shipping fees
Import Duties 10%
MAX TP
30% 40%
2 US SWISS TOTAL
Selling Price 400.00 400.00
100.00 Transfer Price 100.00 (100.00) -
VC (production) (40.00) (230.00) (270.00)
Shipping (20.00) (20.00)
Imp. Duties (10.00) (10.00)
EBT 60.00 40.00 100.00
Tax (18.00) (16.00) (34.00)
NI 42.00 24.00 66.00

3 US SWISS TOTAL
SP 110.00 400.00
Costs:
Purchase Price (152.00)
Prod (40.00) (230.00)
Adv (10.00)
EBT 60.00 18.00
Taxes (18.00) (7.20)
NI 42.00 10.80 52.80
152.00 132.00 divide by: 110%
(20.00)
(12.00)
120.00

MIN. TP
SP of Part no. 54 in US $ 110.00
Less: Adv & rel.selling $ (10.00)
Total $ 100.00

No, Cunningham would be better of by doing the transfer bet. US and Swiss
ORIGINAL DATA
Dreyfess
Units to Out 100,000
SP $ 10.00
VC $ 4.00
FC $ 300,000.00

REQUIREMENT #1

SP offered by Outside $ 7.00

Buy to Dreyfess
@CM
Change in Dreyfess Profit
($3- $4)*50,000 $ (50,000.00)
($0-$3)*50,000

Change in Thomson Profit

($7-$7)*50,000 $ -
Effect To Company Profit $ (50,000.00)

REQUIREMENT #2

New TP $ 7.00
Units to chain 60,000
Capacity 190,000

@CM Sell to Chain Store

Change in Dreyfess Profit
$3*(60,000-50,000) $ 30,000.00
$3*(50,000-60,000)

Change in Thomson Profit

($7-$7)*50,000 $ -
Effect To Company Profit $ 30,000.00

REQUIREMENT #3
Capacity 190,000
VC $ 4.00
Units to Out
Option 1 120,000 $ 9.20
2 150,000 $ 8.40
 3 170,000 $ 7.80

INCREMENTAL ANLAYSIS
Option 1 (@9.20)
Decrease in CM due to price decrease (100k)
Increase in CM due to add'l units
Net Increase in Profit

Option 2 @8.4
Decrease in sales due to price decrease (100k)
Increase in CM due to add'l units
Decrease in CM due to lost sales from Thomson
Net Increase in Profit

Option 3 @7.80
Decrease in sales due to price decrease (100k)
Increase in CM due to add'l units
Decrease in CM due to lost sales from Thomson
Net Decrease in Profit
Thomson
VC $ 8.00 tp
units 50,000

IS Format
Accept outside offer Buy to Outside

Sales $ 1,000,000.00
VC $ 400,000.00
$ (150,000.00) $ 100,000.00 savings CM $ 600,000.00
FC $ 300,000.00
Profit $ 300,000.00
$ -
$ (150,000.00)

units to Thomson 50,000

Sell to thomson IS Format

sell to chain

$ (30,000.00) Sales $ 1,420,000.00

VC $ 640,000.00
CM $ 780,000.00
$ - FC $ 300,000.00
$ (30,000.00) Profit $ 480,000.00

Units to Thomson (upto 50,000 units)

50,000 $ 7.00 $ 120.00
40,000 $ 7.00 $ 9.20
 20,000 $ 7.00 $ 1,104.00

IS
@100,000

Sales $ 1,350,000.00
$ (80,000.00) VC $ 600,000.00
$ 104,000.00 CM $ 750,000.00
$ 24,000.00 FC $ 300,000.00
Profit $ 450,000.00

@100,000
$ (160,000.00) Sales $ 1,350,000.00
$ 220,000.00 VC $ 600,000.00
$ (30,000.00) CM $ 750,000.00
$ 30,000.00 FC $ 300,000.00
Profit $ 450,000.00

$ (220,000.00)
$ 266,000.00
$ (90,000.00) @100,000
$ (44,000.00) Sales $ 1,350,000.00
VC $ 600,000.00
CM $ 750,000.00
FC $ 300,000.00
Profit $ 450,000.00
Buy to dreyfess

$ 1,350,000.00
$ 600,000.00
$ 750,000.00
$ 300,000.00
$ 450,000.00 $ (150,000.00) decrease in company profits

sell to thomson

$ 1,350,000.00
$ 600,000.00
$ 750,000.00
$ 300,000.00
$ 450,000.00 $ 30,000.00

$ 100.00 $ 20.00
$ 10.00 $ (0.80)
$ 1,000.00

@120,000

$ 1,454,000.00
$ 680,000.00
$ 774,000.00 $ 24,000.00
$ 300,000.00
$ 474,000.00

@150,000
$ 1,540,000.00
$ 760,000.00
$ 780,000.00 $ 30,000.00
$ 300,000.00
$ 480,000.00

@170,000
$ 1,466,000.00
$ 760,000.00
$ 706,000.00 $ (44,000.00)
$ 300,000.00
$ 406,000.00
2. The company should shift its income to a lower-tax country and its cost to a high tax country.
If the seller is in a low tax-rate countrry, the transfer price should be set at maximum.
 ITALY US
Reselling Price $ 950.00 Market Pri
Tax 40% VC
landing cos
Mktg VC

REQUIREMENT

1 A. CUP

US Market Price $ 800.00

Landing Cost $ 100.00
Adv Cost $ (40.00)
MIN. TP $ 860.00

gh tax country. B. RPM

Reselling Price $ 950.00

Mark-up % 125%
Cost $ 760.00
Landing Cost $ 100.00
Adv Cost $ (40.00)
MIN TP $ 820.00

C. CPM

Production Cost $ 600.00

Mark-up 125%
SP $ 750.00
Landing Cost $ 100.00
Adv Cost $ (40.00)
MIN TP $ 810.00
 BOTH
$ 800.00 Markup on goods 25%
$ 600.00 Tax 30%
$ 100.00
$ 40.00

30% 40%
US ITY TOTAL
SP $ 950.00 $ 950.00
TP $ 860.00 $ (860.00) $ -
Mfg Cost $ (600.00) $ (600.00)
Landing Cos$ (100.00) $ (100.00)
Import Duty $ (86.00) $ (86.00)
EBT $ 160.00 $ 4.00 $ 164.00
Taxes $ (48.00) $ (1.60) $ (49.60)
NI $ 112.00 $ 2.40 $ 114.40

30% 40%
US ITY TOTAL
SP $ 950.00 $ 950.00
TP $ 820.00 $ (820.00) $ -
Mfg Cost $ (600.00) $ (600.00)
Landing Cos$ (100.00) $ (100.00)
Import Duty $ (82.00) $ (82.00)
EBT $ 120.00 $ 48.00 $ 168.00
Taxes $ (36.00) $ (19.20) $ (55.20)
NI $ 84.00 $ 28.80 $ 112.80

30% 40%
US ITY TOTAL
SP $ 950.00 $ 950.00
TP $ 810.00 $ (810.00) $ -
Mfg Cost $ (600.00) $ (600.00)
Landing Cos$ (100.00) $ (100.00)
Import Duty $ (81.00) $ (81.00)
EBT $ 110.00 $ 59.00 $ 169.00
Taxes $ (33.00) $ (23.60) $ (56.60)
NI $ 77.00 $ 35.40 $ 112.40
ORIGINAL DATA
PULP CARTON
SP $ 70.00 MP
VC $ 42.00 Units
FC $ 18.00
Capacity 50,000

REQUIREMENT 1 & 2

1 Max TP $ 63.00
Min TP $ 70.00

2
Sell to Carton
Change in Pulp's Profit
($63-$70)*5,000 tons $ (35,000.00)
($70-$70)*5,000

Change in Carton's Profit

($63-$63)*5,0000 $ -
Effect $ (35,000.00)

3
50,000 capacity
30,000 used
20,000 available

Max TP $ 63.00
Min TP $ 42.00

4 Max TP $ 63.00
Min TP $ 42.00

Meet the $59 TP

Change in Pulp's Profit
($59-$42)*5,000 tons $ 85,000.00
($70-$42)*5,000

Change in Carton's Profit

($59-$59)*5,0000 $ -

Effect $ 85,000.00
5 No, since the Pulp division has the option to sell the 5,000 tons at a higher p

6 Buy at Pulp
Change in Pulp's Profit
($70-$42)*5,000 tons $ 140,000.00

Change in Carton's Profit

($59-70)*5,0000 $ (55,000.00)

Effect $ 85,000.00
$ 63.00
5,000

No, because there's no acceptabl TP range.

Sell to Outside

$ -

$ -
$ -

Yes, because there's an acceptable TP range.

yes, because $59 is still within the acceptable TP range

Not Meet the $59 TP

$ 140,000.00

$ -

$ 140,000.00
n to sell the 5,000 tons at a higher price at $70.
 1 2 3
Sales units 4,000 4,000 4,000
Price ₱ 224.00 ₱ 224.00 ₱ 224.00
TOTAL ₱896,000.00 ₱896,000.00 ₱896,000.00
Development Cost ₱ (48,000.00)
Manufacturing Cost:
Set-up Cost ₱ 22,400.00 ₱ 22,400.00 ₱ 22,400.00
Production (Direct) ₱576,000.00 ₱576,000.00 ₱576,000.00
Production (Indirect) ₱160,000.00 ₱160,000.00 ₱160,000.00
Logistics:
Customer Service Cost ₱ 64,000.00 ₱ 64,000.00 ₱ 64,000.00
Total Life-cycle Cost
Life Cycle Profit

NPD
Product Design ₱2,000,000.00 8,000 ₱ 250.00 Product Desig
PO ₱ 200,000.00 4,000 ₱ 50.00 Purchasing
Production ₱1,200,000.00 12,000 ₱ 100.00 Production
Depreciation
Production Packing Distribution Packing
Life-cycle Units 5,000 5,000 5,000 Distribution
mH/unit 0.75 0.40 3 Total
Hrs 3,750 2,000 15,000 Total Units
Life cycle Cost/ Unit
Depreciation ₱ 8,000.00 / 3 mos.
# of qtrs for 4 yr 20
Total Dep'n for 4₱ 160,000.00

Packing ₱ 400,000.00 20,000 ₱ 20.00

Distribution ₱ 600,000.00 120,000 ₱ 5.00
 4 5 6 TOTAL
4,000 4,000 4,000
₱ 224.00 ₱ 224.00 ₱ 224.00
₱896,000.00 ₱896,000.00 ₱896,000.00 ₱ 5,376,000.00
₱ (48,000.00)

₱ 22,400.00 ₱ 22,400.00 ₱ 22,400.00 ₱ (134,400.00)

₱576,000.00 ₱576,000.00 ₱576,000.00 ₱ (3,456,000.00)
₱160,000.00 ₱160,000.00 ₱160,000.00 ₱ (960,000.00)

₱ 64,000.00 ₱ 64,000.00 ₱ 64,000.00 ₱ (384,000.00)

₱ (4,982,400.00)
₱ 393,600.00

400 ₱ 250.00 ₱100,000.00

100 ₱ 50.00 ₱ 5,000.00
3,750 ₱ 100.00 ₱375,000.00
₱160,000.00
2,000 ₱ 20.00 ₱ 40,000.00
15,000 ₱ 5.00 ₱ 75,000.00
₱755,000.00
5,000
e cycle Cost/ Unit ₱ 151.00
1 Total Cost ₱ 210,000.00
50%
After-service cos ₱ 105,000.00
Percent attribut 10%
Total cost for L ₱ 10,500.00
Number of Large 40
CSC per Large C ₱ 262.50

2 Total hrs 7,500

Total hrs spent

Percentage of errors
Hrs att.
Rev/hr
Add'l Revenue

Initial Revenue ₱ 701,250.00

Add'l Revenue ₱ 123,750.00
Total Revenue ₱ 825,000.00
Total Cost ₱ 576,600.00
Operating Incom ₱ 248,400.00

3 units produced & 500,000

Current
₱ 10.00 Sales ₱ 5,000,000.00
₱ 6.00 VC ###
 FC ###
NI ₱ 500,000.00

Target VC ₱ 2,340,000.00
Units 460,000
TVC/Unit ₱ 5.09

4 Non-Value Added
SP January
₱ 90.00 Ordering 6,000
₱ 82.00 Delivery 2,000
₱ 21.00 Shelf Stocking 17,200
₱ 0.20 Customer Suppor 100,000

MARCH 2019
VA NVA
18,000 Ordering ₱ 1,620,000.00 ₱ 487,350.00
8,000 Delivery ₱ 656,000.00 ₱ 148,010.00
- Shelf Stockin ₱ - ₱ 325,983.00
250,000 Customer Sup₱ 50,000.00 ₱ 18,050.00
TOTAL

5 OPTION A
1
units
₱ 50.00 Revenue
Design Cost
Production Cost
Fixed
₱ 20.00 VC
Mktg & Dist. Cost
Fixed
₱ 5.00 VC
Salvage Value
Life-cycle Profit

OPTION B
1
SP
units
Revenue
Design Cost
Production Cost
Fixed
₱ 20.00 VC
Mktg & Dist. Cost
Fixed
₱ 5.00 VC
Salvage Value
Life-cycle Profit
 Revenues ₱ 701,250.00
hrs spent 6,375
Rev/hr ₱ 110.00
Not Billed Billed
7,500 7,500
15% 5%
1,125 375
₱ 110.00 ₱ 110.00
₱ 123,750.00 ₱ 41,250.00

sales drop
8% 460,000

Target
₱ 9.00 ₱ 4,140,000.00
₱ (2,340,000.00)
₱ (200,000.00) ₱ (1,300,000.00)
₱ 500,000.00

5%
Non-Value Added
February March
5,700 5,415
1,900 1,805
16,340 15,523
95,000 90,250

TOTAL
₱2,107,350.00
₱ 804,010.00
₱ 325,983.00
₱ 68,050.00
₱3,305,393.00

2 3 4 TOTAL
500,000
₱ 25,000,000.00
₱ (650,000.00)

₱ (3,560,000.00)
 ###

₱ (2,225,000.00)
₱ (2,500,000.00)
₱ 200,000.00
₱ 6,265,000.00

2 3 4 TOTAL
₱ 70.00 ₱ 40.00 ₱ 40.00
100,000 300,000 300,000
₱7,000,000.00 ₱ 12,000,000.00 ₱ 12,000,000.00 ₱ 31,000,000.00
₱ (650,000.00)

₱ (3,560,000.00)
₱2,000,000.00 ₱ 6,000,000.00 ₱ 6,000,000.00 ###

₱ (2,225,000.00)
₱ 500,000.00 ₱ 1,500,000.00 ₱ 1,500,000.00 ₱ (3,500,000.00)
₱ 200,000.00
₱ 7,265,000.00
Page 191, #2
Polland Manufacturing

REQUIREMENT
1
Standard pric $ 12.00 Value-Added Practical Capacity
Inspection - 4,000
$ - $ 48,000.00
$ (48,000.00)
unfavorable
Activity-Volume Variance/
Non-Value Added

No UCV and AVV on Using lumber and purchasing since those costs are variable. Thus, the increase in units is
proportionate to the increase in total cost

2
VA *NVA Actual/Total
$ 10.00 Using Lumber 24,000 6,000 30,000
$ 50.00 Purchasing 800 200 1,000
$ 12.00 Inspection - 4,000 4,000

3 30% KAIZEN STANDARD

AQ Savings KS Std. Price
Using Lumber 30,000 1,800 28,200 $ 10.00
Purchasing 1,000 60 940 $ 50.00
Inspection 4,000 1,200 2,800 $ 12.00

Reduction in Std. Price TOTAL

Using lumber 1,800 $ 10.00 $ 18,000.00
Purchasing 60 $ 50.00 $ 3,000.00
Savings $ 21,000.00

*8there is no savings in Inspection since the reduction in the NVA does not cover the amount
equivalent to one step in the step-fixed cost (2,000 hrs). It only reduced to 1,200.
Another 800 hrs must be reduced in order to have savings in resource spending on inspection

page 198, 5-11

Snow Technology

REQUIREMENT
1
VA PC
Purchasing (units) 14,400 28,800
 (14,400)
unfavorable
AVV/NVA

Purchasing ($) $ 126,000.00 $ 252,000.00

$ (126,000.00)

AVV measures the amount of improvement that is possible through analysis and ma
of activities. It is also the NVA cost.

on the other hand, UCV is the diffference between the available activity and the used
the goal is to reduce the demand for the activity until such time that the unused cap
UCV measures the progress made in reducing this NVA cost.

2 VA NVA TOTAL
Purchasing 14,400 14,400 28,800
$ 8.75 $ 8.75 $ 8.75
$ 126,000.00 $ 126,000.00 $ 252,000.00

4 VA PC
Purchasing $ 126,000.00 $ 210,000.00
$ (84,000.00)

Purchasing $ 126,000.00 $ 252,000.00

$ (126,000.00)

page 204, 5-20

REQUIREMENT

1 VA NVA AQ
Materials Usage $ 2,400,000.00 $ 600,000.00 $ 3,000,000.00
Sustaining Engineering $ 835,200.00 $ 604,800.00 $ 1,440,000.00
$ 1,204,800.00

**units VA NVA AQ
Materials Usage 480,000 120,000 600,000
Sustaining Engineering 27,840 20,160 48,000
 VA $ 48,000.00 PC
Sust. Engr. 27,840 48,000
(20,160) 2,000
(604,800) 60,000
unfavorable favorable

2 KAIZEN 40%

AQ Savings ( NVA * Kaizen Std in $

Mat. Usage 600,000 48,000 552,000 $ 2,760,000.00
Sust. Engr 48,000 8,064 39,936 $ 1,198,080.00
$ 3,958,080.00

3 KS USAGE
Mat. Usage 552,000 584,800
(32,800)
unfavorable
(164,000)

Sust. Engr. 39,936 35,400

4,536
favorable
$ 136,080.00

VA PC
Sust. Engr. 27,840 48,000

(20,160) 12,600
2,000
6
 70% **Step-fixed cost
Usage Cost increases per step. 2,000
2,800
$ 33,600.00 *based on orig data
$ 14,400.00 Actual inspection hrs 4,000
favorable 2,000
unused Capacity Variance Required Steps 2

able. Thus, the increase in units is

TOTAL
$ 282,000.00
$ 47,000.00
$ 33,600.00

cover the amount

ding on inspection

USAGE *purchase cost per purchase order

27,600
 1,200
favorable
UCV

$ 241,500.00
$ 10,500.00

t is possible through analysis and management

en the available activity and the used activity.

until such time that the unused capacity variance equals the AVV/NVA.
is NVA cost.

USAGE
$ 189,000.00 Used PO 21,600
$ 21,000.00 Step in Fixed 4,800
4.5
≈5
$ 189,000.00
$ 63,000.00

Data for:

Mat. Usage
Standard 6
Standard Price $ 5.00

Sustaining Engr.
Standard 58%

2008:
USAGE 6,000 hrs for 5 yrs or less
46,000 2,400 hrs for more than 5 yrs

Number of Engrs 24
Hrs per Engr 2,000
Total hrs of engrs 48,000

Number of Engrs 24
Salary per Engineer $ 60,000.00
total Salaries of Engr. $ 1,440,000.00

Actual Mat. Usage 25%

Engineering Usage 46,000

Total output produced 80,000

2009:
80,000 units

Mat. Used 584,800

Engr. Hrs 35,400

USAGE
35,400

hrs
Number of employees to lay=off or reassign
hrs

*based on req. 1 (kaizen Std)

hrs Improved Inspection hrs 2,800 hrs
hrs 2,000 hrs
1.4
**round UP 2

$ 8.75
Steps 4,800
Frequency 5
24,000

lbs/unit
/ lbs

of current practical capacity

Total Hrs
 4 groups 24,000
10 groups 24,000
48,000

Cost/ enginee $ 30.00

above standard

hrs

units