1 - Cost Elements

Prime Cost = Direct Material Cost + Direct Labor Cost + Direct Expenses Cost

Total Variable Cost = Total Quantity of Output X Variable Cost per Unit of Output
2 - Pricing

1- Simple ROI

Simple ROI = (Gains – Investment Costs)/Investment

2 - Return on Sales

ROS = (Net Profits)/ (Sales)

 Pricing

3 - Return on Assets ROA

Assets Turn Over= Net Profit / Average Total Assets.

ROA = Net Profit Margin (ROS) x Asset Turnover x 100%

4 - Break –Even Analysis

X = FC / (SP-VC) or X = FC / CM

Break-even revenue ($) = (break-even units) x (selling price SP)

3 - Material

1- Economic Order Quantity

EOQ = [√ (2 x D x P) / S]
Annual Production ‫ عن حجم الطلب السنوي للمادة‬D ‫ تعبر‬: ‫حيث‬ -

purchase order costs ‫ تكلفة الطلب‬P -

storage/carrying costs ‫ تكلفة تخزين الوحدة في السنة‬S -

2- Reorder Point

RP = (O x R) + I

Order Time ‫هي وقت الطلب‬O ‫حيث‬ - -

Production Rate ‫معدل االنتاج‬R ‫و‬ - -

minimum inventory level or safety stock ‫الحد االدني الآلمن للمخزون‬I ‫و‬ - -
 Example

- Define the economic order quantity (EOQ) for a mechanical firm that supports a contractor on development of
4,500 homes a year for water heating systems. The cost of each water heater is $250. The storage cost for the
water heaters is $36 per year for space and financing. Furthermore, calculate the computing reorder point (RP)
for the water heaters. Based on water heater per home of 90 per day and lead time is 10 days, the safety level of
stock is 250 water heaters (minimum level).

- EOQ = [√ (2 * 4,500 * $250) / $36 ] = 250 should be ordered

- RP = (10 days x 90 units per day) + 250 = 1,150 Units

1- RS means Cost Data

The city index number = (Specific City Cost / National Average Cost) X 100
1- Effective Tax Rates

Effective Tax Rates =Tax liability / Total taxable income

2 - Marginal Tax Rates MTR

MTR = Additional Taxes Paid / Additional Taxable Income

Straight-Line Depreciation SL

D = (C-S)/N

Double-Declining Balance Depreciation DDB

D = (2/N) (C-BVt-1)

Sum-of-Years Digits Depreciation SOYD

Dr = (C – S)*[(2(N-r+1))/(N(N + 1)]
 Level of Project
Class Used for Methodology Accuracy a Effort b
Definition

Class 5 Screening or
0 % to 2% Conceptual 4 to 20 1
Feasibility

Class 4 1 % to 15% Feasibility Conceptual 3 to 12 2 to 4

Budget Authorization Conceptual

Class 3 10 % to 40% 2 to 6 3 to 10
Or Control / Deterministic

Cost Control or
Class 2 30 % to 70% Deterministic 1 to 3 5 to 20
Tender

Check Estimate or
Class 1 50 % to 100% Deterministic 1 10 to 100
Bid / Tender

For a : Multiply the number given X ( + 10 % & - 5% )

For b : Multiply the number given X ( 0.005% )

1- End‐Product Units Method

CT = u × N

2- Capacity Factor Method

$B/$A = (Cap B/Cap A) e

3- Ratio or Factor Methods

Total plant $ = total equipment $ x equipment factor

Break Even Analysis at 100% of capacity

1 - Breakeven Point (B)

B = ( F + n R ) / (S-V-(1-n) R)

2- Shutdown Point (A)

A = (n R ) / (S-V-(1-n) R)
9 – Production

Prime cost = direct material cost + direct labor cost +

direct engineering cost + direct expense

Manufacturing cost = prime cost + factory expense

+Contingency Costs ( if given)

Production cost = manufacturing cost +

administrative expense

Total cost = production cost + marketing, selling,

and distribution expense

Selling price = total cost + mark-up (profit and

taxes)

Mark-up (amount) = total cost x [% MU /[1 ‐ %

MU]]
Shutdown Point (SD) Revenues = Manufacturing Cost (Direct + Indirect Cost)

Cost Point I Revenues = Total Cost

Required Return Point

Revenues = Total Cost + Required Return
(RR)

Required Return after

Revenue = Total Costs + Required Return / ( 1- tax rate)
Taxes Point (RRAT)
1 – Progress Measurement and Earned Value

1 - Units Completed (Production Method)

Percent Complete = ( Actual Units Installed) / (Total Units Required to be Installed)

2- Weighted or Equivalent Units

Earned tons = (allowed credit) * (summary quantity) x (quantity to date/ total quantity)
3 - Productivity Method

Credit Work hours (CWH) = (budget unit rate) * (actual quantity)

Productivity Index PI = (Sum of Credit work hours ) / (Sum of Actual Work hours)

4- EV Calculations

EV = Q act X Budget Unit Rate

EV = % Complete X Total Budget

Success Index (SI)

Profit-oriented business

SI = (Net Profit) / (Total Cost “ including waste cost”)

Non-profit organizations

SI = (value of service rendered( / )costs of providing services “ including waste cost”)

Effective Interest Rate EIR

EIR = ( 1 + (r /k) )k -1

Continuous Compounding

i=er-1

Capitalized Cost Method

A=P*i so P capitalized = A/i

Annual Compounding
Measures of Location

1- Mean
• Mean is the sum of measurements divided by the number of measurements

2- Median

• The value separating the higher half of a data sample

3- Mode

• The measurement that occurs most often in the data set

Measures of Dispersion

1- Range

• The difference between the largest and smallest data values

2- Variance

• The average of the squared deviations from the mean

• Variance for Population

Б2 =∑ ( x-μ ) 2 / N = (∑x2 – Nμ2)/N

• Variance for Sample

Б2 =∑ ( x-μ ) 2 / N-1 = (∑x2 – Nμ2)/N -1

Discrete Probability Distributions

Variance

σ2 = ∑(Xi – μ)2 P(Xi) , i= 1, 2, 3, ..., n

Standard deviation

√σ