Scribd Logo
Upload

Welcome to Scribd!

  • 35 views

    Chap 10

    Uploaded by

    Khánh Linh Cao
    The document contains examples calculating depreciation expense, variable and fixed costs, gross profit, and gross margin for steel companies AK Steel and Nucor. It analyzes the companies' variable cost percentages, operating leverage, and impact of sales changes on gross profit. The document also provides a projection of sales, expenses, gross profit, and operating income ratio for a company over multiple years as sales increase.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Chap 10

    Uploaded by

    Khánh Linh Cao
    35 views5 pages
    The document contains examples calculating depreciation expense, variable and fixed costs, gross profit, and gross margin for steel companies AK Steel and Nucor. It analyzes the companies' variable cost percentages, operating leverage, and impact of sales changes on gross profit. The document also provides a projection of sales, expenses, gross profit, and operating income ratio for a company over multiple years as sales increase.

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document contains examples calculating depreciation expense, variable and fixed costs, gross profit, and gross margin for steel companies AK Steel and Nucor. It analyzes the companies' variable cost percentages, operating leverage, and impact of sales changes on gross profit. The document also provides a projection of sales, expenses, gross profit, and operating income ratio for a company over multiple years as sales increase.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    35 views5 pages

    Chap 10

    Uploaded by

    Khánh Linh Cao
    The document contains examples calculating depreciation expense, variable and fixed costs, gross profit, and gross margin for steel companies AK Steel and Nucor. It analyzes the companies' variable cost percentages, operating leverage, and impact of sales changes on gross profit. The document also provides a projection of sales, expenses, gross profit, and operating income ratio for a company over multiple years as sales increase.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 5

    Ex 10.

    10:

    a, AVR useful life = Gross PPE/Current Depn Exp

    AVR usdeful life = 10.80 years

    b, 3 steps to calculate total depn exp for year + 1

    S1: Depn exp on existing assets = $ 4,453 Cost - Salvage


    Useful life

    S2: Depn exp on capital expenditure = $ 556

    S3: Depn exp on for year + 1 = $ 5,009

    c, PPE, at cost 48088 6000 54088


    Acc Depn 30544 5009 35553
    PPE, net 17544 18535

    Ex 10.11:

    a,
    AK Steel VC % = 0.568 Variable Cost % = Change in COGS
    Change in Sales

    Total VC = 2963 Total VC = VC % * Sales

    FC = 1591 Fixed Cost = Total cost - VC

    Nucor VC % = 0.613
    Total VC = 6974
    FC = 2155

    b, AK Steel %VC = 65%


    Nucor %VC = 76%

    Companies with less capital intensive usually higher variable cost percentage

    c, AK Steel Sales of Year 4 = 5217

    Year + 1 2 3 4 5
    Sales 5478 6026 7231 6508 5206

    VC (56.8% of Sales) 3112 3423 4107 3697 2957


    FC 1591 1591 1591 1591 1591

    Gross Profit 775 1012 1533 1220 658

    Gross margin 0.14 0.17 0.21 0.19 0.13

    Nucor Sales of Year 4 = 11377

    Year + 1 2 3 4 5
    Sales 11946 13140 15769 14192 11353

    VC (61.3% of Sales) 7323 8055 9666 8699 6960

    FC 2155 2155 2155 2155 2155

    Gross Profit 9791 10985 13614 12037 9198

    Gross margin 0.82 0.84 0.86 0.85 0.81


    Operating Leverage cao, FC (capital intensive) cao hơn, Sale change thì
    chịu nhiều rủi ro hơn -> Sales giảm rất mạnh về level thấp nhất
    Fixed/Variable expense

    Capital intensive (FC)


    Operating LVR k cao, FC, rủi ro thấp, Sales k giảm nhiều
    Ex 10.12:

    2007 2008
    Sales 8296 8871
    COGS -5890 -6290
    SE & AE -1670 -1714
    Oprt I bef 618 867

    a, VC % = 0.696
    Total VC = 6174
    FC = 116

    b, VE % = 0.077
    Total VE = 683
    FE = 1031

    c, Sales of Year 2008 = 8871

    Year + 1 2 3 4
    Sales 9936 10929 11803 12512

    COGS VC (69.6% of Sales) 6915 7607 8215 8708

    FC 116 116 116 116

    SE&AE VE (7.7% of sale) 765 842 909 963

    FE 1031 1031 1031 1031

    Gross Profit 1108 1334 1532 1693

    Gross margin 11.16% 12.21% 12.98% 13.53%

    d, Oprt I bef IT/Sales ratio 0.087 0.079 0.073 0.069

    e, The ratio decrease while Sales increase

    You might also like