16-1 chapter 16 cost analysis for decision making mcgraw-hill/irwin © 2008 the mcgraw-hill...
DESCRIPTION
16-3 relevant cost A relevant cost is a future cost that differs between alternatives. 1 2 Relevant Cost Information L O 1TRANSCRIPT
16-1
CHAPTER 16
Cost Analysis for Decision Making
McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
16-2
Decision Making
Strategic, Operational,and Financial (Planning)
Planning and Control Cycle
Executing operational
activities (Managing)
Data collection and Performance Feedback
Performance analysis: Plans vs.
actual results (Controlling)
L O 1
Implement Plans
Rev
isit
Plan
s
16-3
A relevant costrelevant cost is a future cost that differs between alternatives.
1 2
Relevant Cost InformationL O 1
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Relevant Cost Information
Relevant IrrelevantDifferential Cost -- will differ Allocated Cost -- a common cost thataccording to alternative activities has been arbitrarily assigned to abeing considered. product or activity.
Opportunity Cost -- income foregone Sunk Cost -- has already been incurredby choosing one alternative over and will not change.another.
L O 1
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Example: If you were notattending college, you couldbe earning $20,000 per year. Your opportunity cost ofattending college for oneyear is $20,000.
Opportunity costs are not recorded in the accounting records, but are relevant to
decisions because they are a real sacrifice.
Opportunity CostL O 1
16-6
Will you drive or fly to Colorado for a spring break ski trip? You have gathered the following information to help you with
the decision. Motel cost is $90 per night. Meal cost is $25 per day. Your car insurance is $75 per month. Kennel cost for your dog is $7 per day. Round-trip cost of gasoline for your car is $200. Round-trip airfare and rental car for a week is $700.
Driving requires two days, with an overnight stay, cutting your time in Colorado by two days.
Relevant Cost InformationL O 2
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Colorado Spring BreakDrive/Fly Analysis
Cost Drive FlyMotel 720$ 720$ Meals 200 200 Kennel cost 56 56 Car insurance 75 75 Gasoline 200 - Airfare/rental car - 700
8 days @ $90
8 days @ $25
8 days @ $7
Relevant Cost InformationL O 2
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Costs do not differ,so they are not
relevant to decision.
Also, car insuranceis not relevant tothe decision as itis a sunk cost.
Relevant Cost InformationL O 2
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Transportationcosts differ betweenthe two alternatives,so they are relevant
to your decision.
Are the two extradays in Coloradoworth the $500
extra cost to fly?
Colorado Spring BreakDrive/Fly Analysis
Cost Drive FlyMotel 720$ 720$ Meals 200 200 Kennel cost 56 56 Car insurance 75 75 Gasoline 200 - Airfare/rental car - 700
Relevant Cost InformationL O 2
16-10
The decision to accept additional business should be based on incremental
costs and incremental revenues. Incremental amounts are those amounts
that occur if the company decides to accept the new business.
The Special Pricing DecisionL O 3
16-11
MicroTech currently sells 4,400 laptopcomputers. The company has revenue
and expenses as shown below: Per Unit Total
Sales 2,400$ 10,560,000$ Direct materials 800$ 3,520,000$ Direct labor 450 1,980,000 Variable overhead 250 1,100,000 Fixed overhead 500 2,500,000 Total manufacturing costs 2,000$ 9,100,000$ Sales commission 120 528,000 Total expenses 2,120$ 9,628,000$ Operating income 280$ 932,000$
The Special Pricing Decision
Based on capacity of 5,000 units:$2,500,000 ÷ 5,000 units = $500 per unit.
L O 3
16-12
MicroTech receives an offer to purchase500 of its laptop computers for $1,800 each.
If MicroTech accepts the offer, total fixed overhead will not increase and a selling
commission will not be paid on the computers in the special order.
Should MicroTech accept the offer?
The Special Pricing DecisionL O 3
16-13
First let’s look at incorrect reasoningthat leads to an incorrect decision.
Our manufacturing costis $2,000 per unit. Ican’t sell for $1,800
per unit.
The Special Pricing DecisionL O 3
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Current Business
Special Order
Combined
Sales 10,560$ 900$ 11,460$ Direct materials 3,520$ 400$ 3,920$ Direct labor 1,980 225 2,205 Variable overhead 1,100 125 1,225 Fixed overhead 2,500 0 2,500 Total manufacturing costs 9,100$ 750$ 9,850$ Sales commission 528 0 528 Total expenses 9,628$ 750$ 10,378$ Operating income 932$ 150$ 1,082$
This analysis leads to the correct decision.
The Special Pricing Decision
000’s omitted from all numbers.
L O 3
16-15
Current Business
Special Order
Combined
Sales 10,560$ 900$ 11,460$ Direct materials 3,520$ 400$ 3,920$ Direct labor 1,980 225 2,205 Variable overhead 1,100 125 1,225 Fixed overhead 2,500 0 2,500 Total manufacturing costs 9,100$ 750$ 9,850$ Sales commission 528 0 528 Total expenses 9,628$ 750$ 10,378$ Operating income 932$ 150$ 1,082$
The Special Pricing Decision
500 new units × $800 = $400,000
500 new units × $1,800 selling price = $900,000
L O 3
16-16
Current Business
Special Order
Combined
Sales 10,560$ 900$ 11,460$ Direct materials 3,520$ 400$ 3,920$ Direct labor 1,980 225 2,205 Variable overhead 1,100 125 1,225 Fixed overhead 2,500 0 2,500 Total manufacturing costs 9,100$ 750$ 9,850$ Sales commission 528 0 528 Total expenses 9,628$ 750$ 10,378$ Operating income 932$ 150$ 1,082$
500 new units × $450 = $225,000
The Special Pricing Decision
500 new units × $250 = $125,000
L O 3
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Current Business
Special Order
Combined
Sales 10,560$ 900$ 11,460$ Direct materials 3,520$ 400$ 3,920$ Direct labor 1,980 225 2,205 Variable overhead 1,100 125 1,225 Fixed overhead 2,500 0 2,500 Total manufacturing costs 9,100$ 750$ 9,850$ Sales commission 528 0 528 Total expenses 9,628$ 750$ 10,378$ Operating income 932$ 150$ 1,082$
Even though the $1,800 selling price is less than thenormal $2,400 selling price, MicroTech should accept the
offer because net income will increase by $150,000.
The Special Pricing DecisionL O 3
16-18
If MicroTech accepts the offer, netincome will increase by $150,000.
Increase in revenue (500 × $1,800) $900,000Increase in variable costs (500 × $1,500) (750,000)Increase in operating income $150,000
We can reach the same results more quickly like this:
Special order contribution margin = $1,800 – $1,500 = $300 Change in income = $300 × 500 units = $150,000.
The Special Pricing DecisionL O 3
16-19
Should Icontinue to make
the part, or shouldI buy it?
What will I do with my
idle facilities ifI buy the part?
The Make or Buy DecisionL O 3
16-20
The Make or Buy Decision
The relevant cost of making a component is the cost that can be avoided by buying the component from an outside supplier.
Decision rule: Costs avoided must be greater than outside supplier’s price to consider buying the component.
L O 3
16-21
MicroTech currently makes the motherboardsused in its laptop computers. Unit costs for
manufacturing the motherboards are:
Unit CostsDirect Material 120$ Direct Labor 80 Variable Overhead 50 Fixed Overhead 100 Total 350$
The Make or Buy DecisionL O 3
16-22
An outside supplier has offered to provide the motherboards at a cost of $300 each plus a $5
shipping charge per motherboard. Twenty percent of the fixed overhead will be avoided if the
motherboards are purchased. MicroTech has no alternative use for the facilities.
Should MicroTech accept the offer?
The Make or Buy DecisionL O 3
16-23
Unit CostDirect Material 120$ Direct Labor 80 Variable Overhead 50 Fixed Overhead (20% of $100) 20 Total 270$
Differential costs of making (costs avoided if bought from outside supplier):
The Make or Buy Decision
MicroTech should not pay $305 per unit to an outside supplier to avoid the $270 per unit differential cost of
making the part ($35 disadvantage).
L O 3
16-24
If MicroTech buys the motherboards from the outside supplier, the idle facilities
could be used to expand production of flat screen monitors that have a contribution margin of $50 each.
Does this information change MicroTech’s decision?
The Make or Buy DecisionL O 3
16-25
The real question to answer is: “What is the best use of MicroTech’s facilities?”
Disadvantage of buying ( $305 - $270 ) 35$ Opportunity cost of facilities: Monitor contribution margin 50 Advantage of buying part 15$
The opportunity cost of facilities changes the decision.
The Make or Buy DecisionL O 3
16-26
Continue or Discontinue a Segment
Total Company
Sailboat Division
Motorboat Division
Repair Parts
DivisionSales 2,240,000$ 1,280,000$ 640,000$ 320,000$ Variable expenses 960,000 512,000 288,000 160,000 Contribution Margin 1,280,000 768,000 352,000 160,000 Fixed expenses 1,128,000 656,000 288,000 184,000 Operating income 152,000$ 112,000$ 64,000$ (24,000)$
CRUISERS, INC.CRUISERS, INC.Segmented Income StatementSegmented Income Statement
For the Year Ended December 31stFor the Year Ended December 31stDiscontinue the Discontinue the
Repair Parts Repair Parts Division and Division and
increase increase operating income operating income
by $24,000by $24,000
L O 3
16-27
Continue or Discontinue a SegmentL O 3
What about What about fixed fixed
expenses?expenses?Total
CompanySailboat Division
Motorboat Division
Repair Parts
DivisionDirect fixed Expenses 680,000$ 400,000$ 160,000$ 120,000$ Common fixed expensesallocated in proportionto sales 448,000 256,000 128,000 64,000 Total fixed expenses 1,128,000$ 656,000$ 288,000$ 184,000$
Analysis of Fixed Expenses
16-28
Continue or Discontinue a Segment
We must eliminate more in fixed expenses than theWe must eliminate more in fixed expenses than the amount of contribution margin we are losing. amount of contribution margin we are losing.
L O 3
Decrease in Contribution Margin (160,000) Direct fixed expenses (Repair Parts Division) 120,000Net decrease in contribution margin (40,000)$
Relevant Cost Analysisof Discontinuing the Repair Parts Division
Closing the Repair Parts Division will eliminate:Closing the Repair Parts Division will eliminate:
SalesSales $320,000$320,000Variable ExpensesVariable Expenses 160,000160,000Contribution MarginContribution Margin 160,000 160,000
16-29
Continue or Discontinue a SegmentL O 3
Total Company
Sailboat Division
Motorboat Division
Repair Parts
DivisionSales 2,240,000$ 1,280,000$ 640,000$ 320,000$ Variable expenses 960,000 512,000 288,000 160,000 Contribution Margin 1,280,000 768,000 352,000 160,000 Fixed expenses 1,128,000 656,000 288,000 184,000 Operating income 152,000$ 112,000$ 64,000$ (24,000)$
Sales 1,920,000$ 1,280,000$ 640,000$ Variable expenses 800,000$ 512,000 288,000 Contribution Margin 1,120,000$ 768,000 352,000 Fixed expenses 1,008,000$ 698,667 309,333 Operating income 112,000$ 69,333$ 42,667$
Operating IncomeOperating IncomeDecreases by Decreases by $40,000 if we$40,000 if we
discontinue thediscontinue theRepair PartsRepair Parts
Division.Division.
Operating Income with Repair Parts DivisionOperating Income with Repair Parts Division $152, 000$152, 000Operating Income without Repair Parts DivisionOperating Income without Repair Parts Division (112,000)(112,000)Decrease in Operating IncomeDecrease in Operating Income $ 40,000$ 40,000
16-30
Managers often face the problem of deciding how scarce resources are going to be utilized.
Usually, fixed costs are not affected by this particular decision, so management can focus
on maximizing total contribution margin.
Short-Term Allocationof Scarce Resources
L O 3
16-31
Integrated Technologies produces two productsand selected data are shown below:
Products 1 2
Selling price per unit $ 300 $ 200 Less: variable expenses per unit 150 100 Contribution margin per unit 150$ 100$
Processing time required (hours) 2 1
Short-Term Allocationof Scarce Resources
If 120 hours of processing time are available,which product should be produced?
L O 3
16-32
Let’s calculate the contribution marginper hour of processing time.
Products1 2
Contribution margin per unit $ 150 $ 100 Time required to produce one unit ÷ 2 hours ÷ 1 hourContribution margin per hour 75$ 100$
Short-Term Allocationof Scarce Resources
L O 3
16-33
Let’s calculate the contribution marginper hour of processing time.
Products1 2
Contribution margin per unit $ 150 $ 100 Time required to produce one unit ÷ 2 hours ÷ 1 hourContribution margin per hour 75$ 100$
Short-Term Allocationof Scarce Resources
Product 2 should be emphasized. It is the more valuable use of processing time, yielding a contribution margin of $100 per hour as opposed to $75 per hour
for Product 1.
L O 3
16-34
Let’s calculate the contribution marginper hour of processing time.
Products1 2
Contribution margin per unit $ 150 $ 100 Time required to produce one unit ÷ 2 hours ÷ 1 hourContribution margin per hour 75$ 100$
Short-Term Allocationof Scarce Resources
If there are no other considerations, the best plan would be to produce enough products to meet current demand
for Product 2 and then use of any remaining time to make Product 1.
L O 3
16-35
Let’s change topics.
Long-Run Investment DecisionsL O 4
16-36
Capital Budgeting
Managers must plan significant outlays for projects that have long-term implications such as the purchase of new equipment
and introduction of new products.
L O 4
16-37
Capital budgeting:Analyzing alternative long-
term investments and deciding which assets to acquire or sell.
Outcomeis uncertain.
Large amounts ofmoney are usually
involved.
Investment involves along-term commitment.
Decision may bedifficult or impossible
to reverse.
Capital BudgetingL O 4
16-38
?
?
?
LimitedInvestment
Funds
PlantExpansion
NewEquipment
OfficeRenovation
I will choose theproject with the mostprofitable return on
available funds.
Investment Decision Special Considerations
L O 4
16-39
• Business investments extend over long periods of time, so we must recognize the time value of money.
• Investments that promise returns earlier in time are preferable to those that promise returns later in time.
Investment Decision Special Considerations
L O 5
16-40
• The firm’s cost of capital is usually regarded as the most appropriate choice for the discount rate used to calculate the present value of the investment proposal being analyzed.
• The cost of capital is the average rate of return the company must pay to its long-term creditors and stockholders for the use of their funds.
Cost of CapitalL O 6
16-41
Capital Budgeting Techniques
Methods that use present value analysis:• Net present value (NPV).• Internal rate of return (IRR).
Methods that do not use present value analysis:• Payback.• Accounting rate of return.
L O 6
16-42
A comparison of the present value of cash inflows with the present value of
cash outflows
Net Present Value (NPV)L O 7
16-43
Chose a discount rate – the minimum required rate of return.
Calculate the presentvalue of cash inflows.
Calculate the presentvalue of cash outflows.
NPV = –
Net Present Value (NPV)L O 7
16-44
General decision rule . . .
If the Net Present Value is . . . Then the Project is . . .
Positive . . . Acceptable, since it promises a return greater than the cost of
capital.
Zero . . . Acceptable, since it promises a
return equal to the cost of capital.
Negative . . . Not acceptable, since it
promises a return less than the cost of capital.
Net Present Value (NPV)L O 7
16-45
BoxMover, Inc. is considering the purchase of a conveyor costing $16,000 with a 7-year useful life and a $5,000 salvage value.
Annual net cash flows are shown in the following table. BoxMover’s cost of capital is 12 percent. Ignoring taxes, compute the NPV for this investment.
Net Present ValueL O 7
16-46
YearAnnual Net Cash Flows
Present Value of $1
Factor
Present Value of
Cash Flows1 $4,000 0.8929 $3,5712 $4,200 0.7972 $3,3483 $4,200 0.7118 $2,9894 $4,400 0.6355 $2,7965 $4,800 0.5674 $2,7246 $4,000 0.5066 $2,0277 $3,800 0.4523 $1,719
Salvage $5,000 0.4523 $2,262Total $34,400 $21,436Amount to be invested ($16,000)Net present value of investment $5,436
Net Present ValueL O 7
16-47
YearAnnual Net Cash Flows
Present Value of $1
Factor
Present Value of
Cash Flows1 4,000$ 0.8929 $3,5712 4,200$ 0.7972 $3,3483 4,200$ 0.7118 $2,9894 4,400$ 0.6355 $2,7965 4,800$ 0.5674 $2,7246 4,000$ 0.5066 $2,0277 3,800$ 0.4523 $1,719
salvage 5,000$ 0.4523 $2,262Total 34,400$ $21,436Amount to be invested -$16,000Net present value of investment $5,436
Present value factorsfor 12 percent
Net Present ValueL O 7
16-48
YearAnnual Net Cash Flows
Present Value of $1
Factor
Present Value of
Cash Flows1 4,000$ 0.8929 3,571$ 2 4,200 0.7972 3,348 3 4,200 0.7118 2,989 4 4,400 0.6355 2,796 5 4,800 0.5674 2,724 6 4,000 0.5066 2,027 7 3,800 0.4523 1,719
salvage 5,000 0.4523 2,262 Total 34,400$ 21,436$ Amount to be invested (16,000) Net present value of investment 5,436$
A positive net present value indicates that thisproject earns more than 12 percent, so the
investment should be made.
Net Present ValueL O 7
16-49
Brown Company can buy a new machine for $96,000 that will save $20,000 cash per year in
operating costs. If the machine has a useful life of 10 years and Brown’s cost of capital return is 12
percent, what is the NPV? Ignore taxes.
a. $ 4,300b. $12,700c. $11,000d. $17,004
Net Present Value (NPV)L O 7
16-50
Brown Company can buy a new machine for $96,000 that will save $20,000 cash per year in
operating costs. If the machine has a useful life of 10 years and Brown’s cost of capital return is 12
percent, what is the NPV? Ignore taxes.
a. $ 4,300b. $12,700c. $11,000d. $17,004
Using the present value of an annuity
PV of inflows = $20,000 × 5.6502 = $113,004
NPV = $113,004 - $96,000 = $17,004
Net Present Value (NPV)L O 7
16-51
Calculate the NPV if Brown Company’s cost of capital is 14 percent instead of 12 percent.
Note that the NPV is smallerusing the larger interest rate.
Using the present value of an annuity
PV of inflows = $20,000 × 5.2161 = $104,322
NPV = $104,322 - $96,000 = $8,322
Net Present Value (NPV)L O 7
16-52
Ranking Investment Projects
Profitability Present value of cash inflows index Investment required=
A BPresent value of cash inflows $81,000 $6,000Investment required 80,000 5,000Profitability index 1.01 1.20
Investment
The higher the profitability index, themore desirable the project.
L O 7
16-53
The actual rate of return that will be earned by a proposed investment.
The interest rate that equates the present value of inflows and outflows from an investment project – the discount rate at which NPV = 0.
Internal Rate of Return (IRR)L O 7
16-54
Decker Company can purchase a new machine at a cost of $104,322 that will save $20,000 per year in cash operating costs.
The machine has a 10-year life.
Internal Rate of Return (IRR)L O 7
16-55
Future cash flows are the same every year in this example, so we can
calculate the internal rate of return as follows:
Investment required Net annual cash flows
PV factor for theinternal rate of return =
$104, 322 $20,000 = 5.2161
Internal Rate of Return (IRR)L O 7
16-56
Find the 10-period row, move across until you find the factor 5.2161. Look at the top of the column and you find a rate of 14%14%.
Periods 10% 12% 14%1 0.9091 0.8929 0.87722 1.7355 1.6901 1.6467
. . . . . . . . . . . .9 5.7590 5.3282 4.946410 6.1446 5.6502 5.2161
Using the present value of an annuity of $1 table . . .
Internal Rate of Return (IRR)L O 7
16-57
Decker Company can purchase a new machine at a cost of $104,322 that will save $20,000 per year in cash operating costs.
The machine has a 10-year life.
Internal Rate of Return (IRR)
The internal rate of return internal rate of return on this project is 14%.
If the internal rate of return is equal to or greater than the company’s required rate of return, the project is acceptable.
L O 7
16-58
If annual cash inflows are unequal, trial and error solution will result if present value
tables are used.
Sophisticated business calculators and electronic spreadsheets can be used to
easily solve these problems.
Internal Rate of Return (IRR)L O 7
16-59
Some Analytical Considerations Sensitivity analysis and post audits are
helpful in dealing with estimates. Cash flows far into the future are often not
considered because of uncertainty and a small impact on present values.
Cash flows are assumed to occur at the end of the year.
Some projects will require additional investments over time.
L O 8
16-60
Some Analytical Considerations Often, after-tax cash flow can be estimated by
adding back depreciation expense (a noncash item) to net income.
Increased working capital is initially treated as an additional investment (cash outflow) and as a cash inflow if recovered atthe end of the project’s life.
Least cost projects, often requiredby law, will have negative NPV’s.
L O 8
16-61
Jones Company is considering purchasing a machine that costs $55,000 with a 5-year life and $5,000 salvage value.
Cost and revenue informationCost of machine $ 55,000 Revenue 76,000$ Cost of goods sold 50,000 Gross profit 26,000$ Cash operating costs 5,000$ Depreciation 10,000 15,000 Pretax income 11,000$ Income tax 4,400 After-tax income 6,600$
($55,000 - $5,000) ÷ 5 years
Some Analytical ConsiderationsL O 8
16-62
Most capital budgeting techniques use annual net cash flow.
Depreciation is not a cash outflow.
Annual net income 6,600$ Add back annual depreciation 10,000 Annual net cash flow 16,600$
Some Analytical ConsiderationsL O 8
16-63
Payback Period
The payback period of an investmentis the number of years it will take to
recover the amount of the investment.
Managers prefer investing in projects with shorter payback periods.
L O 9
16-64
TexCo wants to install a machine
that costs $17,000 and has an 8-year
useful life with $1,000 salvage
value. Annual net cash flows are:
YearAnnual Net Cash Flows
Cumulative Net Cash
Flows0 (17,000)$ (17,000)$ 1 4,000 (13,000) 2 3,500 (9,500) 3 3,500 (6,000) 4 3,500 (2,500) 5 3,500 1,000 6 3,500 4,500 7 3,000 7,500 8 3,000 10,500
Payback Period
Includes salvage
L O 9
16-65
YearAnnual Net Cash Flows
Cumulative Net Cash
Flows0 (17,000)$ (17,000)$ 1 4,000 (13,000) 2 3,500 (9,500) 3 3,500 (6,000) 4 3,500 (2,500) 5 3,500 1,000 6 3,500 4,500 7 3,000 7,500 8 3,000 10,500
4.7
TexCo recovers the$17,000 purchase price
between years 4and 5, about 4.7
years for the payback period.
Payback PeriodL O 9
2,500/3,500 = .7 years + 4 years2,500/3,500 = .7 years + 4 years
16-66
Ignores the time valueof money.
Ignores cashflows after the payback
period.
Payback PeriodL O 9
16-67
Consider two projects, each with a five-yearlife and each costing $6,000.Project One Project Two
Net Cash Net CashYear Inflows Inflows
1 2,000$ 1,000$ 2 2,000 1,000 3 2,000 1,000 4 2,000 1,000 5 2,000 1,000,000
Payback 3 years 4.002 yearsWould you invest in Project One just because
it has a shorter payback period?
Payback PeriodL O 9
Yes...Payback Period
ignores allfuture cashflows after
thepayback period
16-68
The accounting rate of return focuses onaccounting income instead of cash flows.
Accounting Rate of Return
Accounting Operating incomerate of return Average investment=
L O 10
16-69
Reconsider the $17,000 investment being considered by TexCo. The annual operating
income is $2,000. Compute theaccounting rate of return.
Accounting Rate of Return
Accounting Operating incomerate of return Average investment=
L O 10
16-70
Reconsider the $17,000 investment being considered by TexCo. The annual operating
income is $2,000. Compute theaccounting rate of return.
Accounting Rate of ReturnCash flow 4,000$ Depreciation 2,000 Operating income 2,000$
Depreciation = ($17,000 -1,000) ÷ 8 years
Accounting Operating incomerate of return Average investment=
Beginning book value + Ending book value2
L O 10
16-71
Accounting Rate of Return
Accounting $ 2,000rate of return $16,000=
$17,000 + $15,0002
Reconsider the $17,000 investment being considered by TexCo. The annual operating
income is $2,000. Compute theaccounting rate of return.
= 12.5%
L O 10
16-72
Depreciation may be calculated several ways.
Income may vary from year to year.
Time value ofmoney is ignored.
So why would I ever want to use this method
anyway?
Accounting Rate of ReturnL O 10
16-73
In addition to the consequences of various quantitative models, management’s investment decisions are influenced by such qualitative factors as:1. A business segment requiring special consideration;2. Mandatory regulations and goals;3. Technological developments within the industry; and4. Limited resources and capital rationing.
Investment DecisionsInvestment DecisionsL O 11
1234
16-74
End of Chapter 16