web viewmodule 3 • trend and variation analysis. module 4 • data relationship analysis....

Budget Analysis Budget Analysis WorkshopWorkshop

Workbook, Version 5.0

BUDG8100-W

Graduate School USA

Washington, DC 20024

(888) 744-GRAD

www.graduateschool.edu

Copyright © 2003—2012 by FedTrain, Inc.

Portions of this manuscript, exclusive of public domain materials, are protected by an additional copyright. All rights reserved to those portions by FedTrain, Inc. 2451 Cumberland Pkwy, MS 3698, Atlanta, GA 30339. No portion of this manuscript may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system without the permission in writing from FedTrain, Inc. Said permission is conveyed, herein, exclusively to the Graduate School USA.

This manuscript has been reprinted by the Graduate School USA for use in BUDG8100D with permission of FedTrain, Inc.

Workbook

Table of Contents

Organization ChartsFederal Service Center Regional Organization 2

Federal Service Center Headquarters Staff Offices 3

Management Analysis Teams Structure 4

Data Displays—Federal Service CenterPrior Year Data 5

Five Year Data—HQ—Appropriated Funds 6

Five Year Data—Regions—Revolving Funds 7

Prior Year Workload Accomplished 8

Regions—Consolidated Service Rates (CSR) 11

ExercisesPerformance Measurement 13

Trend and Variation Analysis 19

Data Relationship Analysis 27

Cost Analysis 43

© Graduate School USA 1 Budget Analysis Workshop© 2012, FedTrain, Inc.

Workbook

Budget Analysis Workshop 2 © Graduate School USA© 2012, FedTrain, Inc.

Char

t 1

Workbook


Char

t 2

Workbook


Char

t 3

Workbook


Char

t 4

Workbook


Char

t 5

Workbook


Char

t 6

Workbook


Char

t 7

Workbook


Char

t 8

Workbook


Char

t 9

Workbook


Char

t 10

Module 2Module 2Performance MeasurementPerformance Measurement

Exercise

13

Exercise 2-1—Analyzing US Gross Domestic Product, Federal Outlays,

Federal Debt, Employment and Crude Oil Prices

Item 1960 1970 1980 1990 2000 2010 Est.

1. Gross GDP ($ Bil) 1/ $ 518.9 $ 1,012.7 $ 2,724.2 $ 5,734.5 $ 9,821.0 $ 14,623.9

a. Percent Change—GDP (.00)

95.16 % 169.00 % 110.50%

2. Federal Outlays ($Bil) 2/ $ 111.6 $ 195.6 $ 590.9 $ 1,253.0 $ 1,789.0 $ 3,720.7

a. Percent Change—Outlays (.00)

75.27 % 202.10% 112.05%

3. Federal Debt ($Bil) 3/ $ 286.3 $ 370.9 $ 907.8 $ 3,233.2 $ 5,674.3 $ 13,786.0

a. Percent Change—Outlays (.00)

29.55 % 144.76% 256.16%

4. Employment Levels 4/ (Mil)

89.4 119.8 156.8 195.3 238.8 246.4

a. Percent Change—Employment (.00)

34.00% 30.88% 24.55 %

5. World Oil Prices 5/ ($ per barrel)

$ 16.78 $ 14.10 $ 13.41 $ 24.06 $ 20.38 $ 79.47

a. Percent Change—Oil Prices (.00)

-16.97 % -4.89 % 79.42%

6. Outlays percent of GDP (.00)

21.51% 19.31% 21.69% 21.85%

7. Debt percent of GDP (.00)

55.17% 36.62% 33.32% 56.38%

1. FY 2011 U.S. Budget, Table 10.1 (As of the end of the calendar year);2. FY 2011 U.S. Budget, Table 3.2 (For the fiscal year ending) 3. www.usgovernmentdebt.us/index.php (For the fiscal year ending);4. www.bls.gov (As of the end of the calendar year)

14

Module 2 • Performance Measurement

This page intentionally left blank



Exercise 2-2—Performance Measurement

Workload and Resource Consumption Data

Management Analysis Teams

Item Description PY-3 PY-2 PY-1 PY CY Est

Enter the FY in the blank spaces to the right

Workload Data

1. Number of MAT studies conducted 35 33 31 30 29

2. Number of fulltime equivalents (FTEs) under study 349,860 329,868 340,876 336,210 319,400

3. Average cost per FTE under study (OCC 10.0) $34,184 $34,747 $35,456 $36,106 $36,789

4. Total dollars under study (OCC 10.0) ($MIL) 11,959.6 11,461.9 12,086.1 12,139.2 11,750.4

5. Number of FTEs validated on-site 336,215 317,003 328,979 320,408 300,879

6. Number of FTEs restored after appeal 3,934 3,392 2,987 6,953 9,967

7. Net final number of FTEs validated 340,149 320,395 331,966 327,361 310,846

8. Net final number of FTEs invalidated 9,711 9,473 8,910 8,849 8,554

Resource Consumption

9. Number of MAT Mandays Consumed in the Studies 10,045 9,009 8,029 7,665 7,207



10. Direct Obligations of Operations (All OCCs) 4,088,318 3,757,016 3,409,984 3,232,102 3,048,162

11. Indirect Obligations of Operations 369,876 339,646 314,598 301,631 293,485

12. Overhead Obligations to Support Operations 449,715 450,842 409,198 387,852 365,779

13. Total Obligations for MAT Study Operations (All OCCs)

4,907,908 4,547,503 4,133,780 3,921,585 3,707,427



Exercise 2-2—Performance Measurement (cont.)

Management Analysis Teams

Analysis of the Data PY-3 PY-2 PY-1 PY CY Est

Enter the FY in the blank spaces to the right

Determine the following:

14. Gross $$ Savings per Invalidated FTE ($000) 8 x 3 $331,955 $329,155 $315,898 $319,502

14.1 Percent Saved 14/4 2.8% 2.9% 2.6% 2.6%

15. Percent FTE’s invalidated 8/2 2.8% 2.9% 2.6% 2.6%

16. Gross Study Obligations per FTE Invalidated 13/8 $505 $480 $464 $443

16.1 Percent Change -5.0% -3.4% -4.5%

17. Direct Study Obligations per FTE Invalidated 10/8 $421 $397 $383 $365

17.1 Percent Change -5.7% -3.5% -4.7%

18. Gross Obligations per Study 13/1 $140,226 $137,803 $133,348 $130,720

18.1 Percent Change -1.7% -3.2% -2.0%

19. Percent Change in Gross Study Obligations Per Year (Ln 13)

-7.3% -9.1% -5.1%


Module 3Module 3Trend and Variation Trend and Variation AnalysisAnalysis

Exercises

19

Practice Exercise 3-1—Trend Analysis: Project the Labor Dollars for FY-5

($000)

Item FY-1 FY-2 FY-3FY-4

EstimateFY-5

Projected

1. Salary Obligations $1,421.2 $1,492.3 $1,565.9 $1,757.8

2. Rate of Change 5.0% 4.9%

3. Percent of Total Obligations

82.5% 82.6% 82.5%

4. Benefits Obligations $301.3 $315.1 $331,4 $362.6


6. Percent of Total Obligations

17.5% 17.4% 17.5%

7. Total Civilian Pay Obligations

$1,722.50 $1,807.4 $1,897.3 $2,120.4


Students will begin the analysis by calculating the values in column FY 4 Estimate. You should not attempt to complete FY 5 until you have answered the questions in the Participant Guide—and—have received additional information from your instructor.

20

Module 3 • Trend and Variation Analysis

This page intentionally left blank



Exercise 3-2—Trend Analysis

Management Analysis Division

Object Classification: 21.00 Travel and Transportation of PersonsSub-Object Classification: 21.63 MAT Study Team Annual Program

Workload FYPY-3 FYPY-2 FYPY-1 FYPYFYCYEst.*

FYBYEst.

Enter the FY in the blank space to the right

1. Number MAT Studies Planned

37 36 35 33 32 36

2. Number MAT Studies Accomplished

35 33 31 30 29

STAFFING DATA

3. Number of MA Teams 5 5 5 4 4 4

4. Average Number of Persons per MAT

8.2 7.8 7.4 7.3 7.1 7.1

TRIP DATA

5. Number of Study Days on Site 5,740 5,148 4,588 4,380 4,176

OBLIGATION DATA

6. Dollars Obligated ($000) $ 1,398 $ 1,307 $1,211 $ 1,200 $ 1,186

*FYCY data are accurate through this point in FYCY.



Exercise 3-2—Trend Analysis (cont.)

Management Analysis Division

Object Classification: 21.00 Travel and Transportation of PersonsSub-Object Classification: 21.63 MAT Study Team Annual Program

Workload FYPY-3

FYPY-2

FYPY-1

FYPYFYCY Est.*

FYBY Est.

Enter the FY in the blank space to the right

ANALYSIS

7. What is the relationship for the following?

7.1 Percent MAT studies accomplished (2/1)

94.6 91.7 88.6 90.9 90.6

7.2 Number of MAT studies per team/year. (2/3)

7.0 6.6 6.2 7.5 7.3

7.3 Number of days on site per study (5/2) 164.0 156.0 148.0 146.0 144.0

7.4 Travel obligations per study (6/2) 39,942 39,606 39,065 40,000 40,897

7.5. Travel obligs. per day on site (6/5) 243.55 253.89 263.95 273.97 284.00

*FYCY data are accurate through this point in FYCY.



Exercise 3-3—Variation Analysis The student will not be required to conduct this analysis due to time limits for the course. Instead, the instructor will present these materials on the projection screen and lecture on the benefits of conducting variation analysis. The following charts were designed to show the intricacies and benefits of ‘drilling down’ in the data to develop a more precise analysis. This module builds on the macro analysis completed in the first part of Module 3.

1. FYPY-3 ( ) Cumulative Data

Item 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr (Note 1)

Planned Studies 8 17 26 37Accomplished 6 14 24 35Percent Accomplished 75.0% 82.4% 92.3% 94.6%Total Days Accumulated 1,378 2,540 4,490 5,740Days per Study 230 181 187 164Dollars Obligated (000) $293.1 $615.1 $1,006.6 $1,398.0 Dollars per Day $213 $242 $224 $244

2. FYPY-2 ( )


Planned Studies 8 14 23 36Accomplished 7 14 21 33Percent Accomplished 87.5% 100.0% 91.3% 88.6%Total Days Accumulated 1,133 2,409 3,924 5,148Days per Study 162 172 187 156Dollars Obligated (000) 352.9 605.8 980.3 1,307.0Dollars per Day $311 $251 $250 $254

3. FYPY-1 ( )


Planned Studies 7 15 22 33Accomplished 6 13 23 31Percent Accomplished 85.7% 86.7% 104.5% 93.9%Total Days Accumulated 1,147 2,180 3,533 4,588Days per Study 191 168 154 148



Dollars Obligated (000) $314.9 $569.2 $892.5 $1,211.0Dollars per Day $275 $261 $253 $264 (Note 1: All data are cumulative)



Exercise 3-3—Variation Analysis (cont.)


27

4. Last Year ( )


Planned Studies 7 15 22 33Accomplished 7 15 20 30Percent Accomplished 100.0% 100.0% 90.9% 90.9%Total Days Accumulated 1,051 2,098 3,426 4,380Days per Study 150 140 171 146Dollars Obligated (000) $312.0 $564.0 $972.0 $1,200.0Dollars per Day $297 $269 $284 $274

5. Prior Year Totals ( )


Planned Studies 30 61 93 139Accomplished 26 56 88 129Percent Accomplished 86.7% 91.8% 94.6% 92.8%Total Days Accumulated 4,709 9,227 15,373 19,856Days per Study 181 165 175 154Dollars Obligated (000) $1,272.9 $2,354.1 $3,851.4 $5,116.0Dollars per Day $270 $255 $251 $258

6. This Year Y-T-D ( )


Planned Studies 7 16 24 32Accomplished 7 16

Percent Accomplished 100% 100%

Total Days Accumulated 1,136 2,464

Days per Study 162 154

Dollars Obligated (000) $342.90 $710.00

Dollars per Day $302 $288

(Note 1: All data are cumulative)

Module 4Module 4Data Relationship AnalysisData Relationship Analysis

Study Quiz and Exercises

28

Module 4 • Data Relationship Analysis

Module 4 Study Quiz

Directions: The following questions relate to Mr. Johnson’s assignment, Mrs. Arck’s memo and Sam’s handwritten notes. Circle the correct answer(s).

1. The budget you are to prepare is for only the incremental costs of the Government Purchase Card Audit Team (GPCAT), not for the entire budget for the headquarters.

a. True

b. False

2. The budget control figure stated by OMB is:

a. $250,000 for this year

b. $325,000 for next year

c. $575,000 for all 18 months

d. All of the above

3. The hire plan envisions they will hire 10 persons in pay period 8.

a. True

b. False

4. The rest of the team will be hired in pay period 13.

a. True

b. False

5. The workstations are to be purchased this year.

a. True (In the baseline estimate.)

b. False

6. The GPCAT will need fewer phones and phone lines than other elements of the HQ.

a. True

b. False

7. All 22 new hires will go to training in Washington, DC.

a. True

b. False



8. The training is for 10 days, but the travel duty will be for 12 days.

a. True

b. False

9. The employee immediately reports for training after being hired.

a. True

b. False

10. After training, the employee hangs around at the HQ awaiting a full team to be formed before conducting GPCAT audit travel.

a. True

b. False

11. All new employees will travel doing audits except the GS-8.

a. True

b. False

12. Each team member is expected to travel _____ pay periods in year 2.

a. 22

b. 26

c. 20

d. None of the above

13. Each team member will travel _____ days per pay period conducting audits.

a. 6

b. 4

c. 8


14. Travel obligations last year were $1,190,000 of which _____% was for operational travel?

a. 15

b. 30

c. 85




15. OCC 26.0 is for supplies. Operating supplies are a part of the account. How much of the obligations are for operating supplies?

a. $43,000 last year

b. $22,800 this year

c. Both a. and b.


16. If the cost of an item went up 5% from last year to this year, then you should estimate that next year’s costs would likewise go up 5% above this year’s cost.

a. True

b. False

17. To balance the final budget to the OMB guidance, you can plan for the GS-8 to stay at the HQ if needed to save travel dollars.

a. True

b. False

18. You can also consider leasing equipment in lieu of purchase if it is cheaper.

a. True

b. False

19. The number of people in the HQ:

a. 204 last year

b. 206 last year

c. Both a. and b.


20. The number of workstations in the HQ increased by 9 from last year.

a. True

b. False

21. The number of training days completed in the HQ last year vs. this year:

a. Are comparable

b. Are not comparable because one number is for a whole year and the other is for six months

c. Are greater this year than last© Graduate School USA 31 Budget Analysis Workshop© 2012, FedTrain, Inc.


22. The purchase price of laptop computers went up from last year to this year.

a. True

b. False

23. There are _____ more telephone lines in the HQ this year than last year.

a. 15

b. 30

c. 85


24. When calculating percentages, you should round to the nearest one decimal point. The correct rounding is as follows:

a. 5.001% is rounded to 5.1%

b. 17.449% is rounded to 17.5%

c. 11.681% is rounded to 11.7%


25. Your final products due to Mr. Johnson are:

a. A baseline estimate for 18 months

b. A baseline estimate and alternative if the baseline exceeds $575,000

c. Are greater this year than last




Chart 11Module 4—FSC Obligations ($000) (Estimated Through Mar 31, CY)

Title OCC Last Year (PY) This Year (CY)

Salaries 11.0 $ 9,353 $ 5,004

Benefits 12.0 1,964 1,101

Travel 21.0 1,190 509

Transportation 22.0 19 11

Rent & Utilities 23.0 428 229

Communications 23.0 102 60

Printing 24.0 143 84

Services 25.0 550 330

Supplies 26.0 215 115

Equipment 31.0 282 165

Total Obligations $ 14,246 $ 7,608



Module 4—Data Relationship Analysis Exercise—Detailed Information from Sam

Chart 12

Item Last Year This Year Y-T-D

General Information

Employees 204 206

Operational Travel Days 5,895 2,341

Training Detail—Graduate School USA, Washington, DC

Number of Trainees 18 9

Number of Training Days 417 246

Travel and per diem costs $76,680 $45,738

Tuition $37,800 $21,175

Facilities and Furniture DetailGross Square Feet of Facilities 42,600 40,800

Square Feet for Common Areas 20,375 21,750

Square Feet in Workstations 11,520 11,640

Number of Workstations in Use 192 194

Communications DetailTelephone Instruments in Use 190 201

Telephone Lines in Service 156 158

Furniture and Equipment Detail (Con’t)Purchase the furnitureModular Workstations: Desk, files, and chair $1,286 $1,302

Laptop Computer $1,680 $1,545

Desktop Telephone Instrument $207 $228

Printers (1 per 6 Workstations) $520 $600

Copy Machine (1 per Office) $1,870 $2,000

Fax Machine (1 per Office) $175 $185

Monthly amounts to rent/lease the equipment

Modular Workstations: Desk, files, and chair $32 $35

Computer $99 $106

Telephone Instrument NA Na

Printers (1 per 6 Workstations) $29 $35

Copy Machine (1 per Office) $94 $103



Fax Machine (1 per Office) NA NA



Exercise 4-1—Data Drivers Computation Use the following computational aids to assist you in developing the Data Drivers required to compute values to be entered on Schedule A. Student should round the amounts to the nearest whole number unless otherwise instructed. (Some students will benefit as the instructor completes these tables on the projection screen along with them. Others may want to work ahead.)

1. Determining the Data Driver and Schedule A Baseline Requirement for Training Travel:The obligations per day for Training Travel

Item Last Year

This Year

NextYear

Calculating historical data:

1. Travel and per diem costs (Chart 12) –

2. Training days (Chart 12) –

3. Travel and per diem costs per training day. (Data Driver) DDDD

Calculating the Schedule A Requirement

4. Number of travelers to classes—Washington, DC (Arck Memo)

–

5. Number of travel days each will be TDY –

6. Total travel days required –

7. Dollar Requirement—Schedule A. (Line 3 x Line 6) –

2. Determining the Data Driver and Schedule A Baseline Requirement for Training Tuition:The obligations per student for Training Tuition

Item Last Year

ThisYear

Next Year

8. Number of trainees going to classes—Washington, DC (Arck Memo) (Line 4, Table 1 above)

–

9. Tuition charge per trainee (Arck Memo) DDDD –

10. Dollar Requirement—Schedule A. (Line 8 x Line 9) –



Exercise 4-1—Data Drivers Computation (cont.)

3. Determining the Data Driver and Schedule A Baseline Requirement for GPCAT (Operational) Travel: The obligations per GPCAT Audit Travel day

Item LastYear

ThisYear

NextYear


11. Travel and per diem Obligations (Chart 11) –

12. Less 15 percent for non-operational travel(Sam’s notes) (Line 11 – 15%)

–

13. Number of Operational travel days completed (Chart 12)

–

14. Travel obligations per travel day. (Line 12 ÷ Line 13) Next year increases by the inflation factor per Sam’s notes DDDD

15. Number of GPCAT travel days to be performed (Arck Memo)

–

16. Dollar requirement for GPCAT Audit Travel—Schedule A. (Lines 14 x 15)

–




4. Determining the Data Driver and Schedule A Baseline Requirement for Rent and Utilities: The obligations per square foot per month for GSA rent.

Item LastYear

This Year

NextYear

Calculating Historical Data:

17. Total square feet rented now. (Chart 12) –

18. Total square feet for workstations now. (Chart 12) –

19. Number of workstations in use now. (Chart 12) –

20. Square feet per workstation (Lines 18 ÷ 19) DDDD –

21. Obligations for rent and utilities (Obligation Chart 11) –

22. Cost per square foot for rent and utilities (Lines 21 ÷ 17) DDDD

Calculating the Schedule A Requirement:

23. Number GPCAT workstations required (Arck Memo) –

24. Total square feet required for workstations. (Lines 20 x 23)

–

25. Total square feet required for common areas (Arck Memo)

–

26. Total GPCAT square feet to be rented from GSA (Lines 24 + 25)

–

27. Dollar requirement for GPCAT rent and utilities—Schedule A (Line 26 x 22) (Note: this year divide answer in half—representing the six months rent.)

–




5. Determining the Data Driver and Schedule A Baseline Requirement for Communications: The obligations per line per month for telecommunications.

Item Last Year This Year Next Year

Calculating Historical Data:

28. Number of phone lines in use (Chart 12) –

29. Number of employees (Chart 12) –

30. Lines per employee (00.00) (Lines 28 ÷ 29) DDDD –

31. Obligations for communications (Obligation Chart 11) –

32. Obligations per line per month. DDDD

(Lines 31 ÷ 28) ÷ (12 months last year and 6 months this year. Next year increases by the inflation factor per Sam’s notes.) ($00.00)

Calculating the Schedule A requirement for Communications:

33. Number of FTEs hired.(Arck Memo—Participant Guide) –

34. Number of lines ordinarily needed (Lines 33 x 30) –

35. Total lines required per Arck Memo (Line 34 + 15%) –

36. Dollar requirement for GPCAT communications costs—Schedule A (Lines 35 x 32) x (6 months this year and 12 months next year)

–

Calculating the Telephone Instrument Requirement:

37. Cost to purchase a desktop phone. (Chart 12) – –

38. Dollar requirement for GPCAT desktop telephone purchase—Schedule A (Lines 37 x 33) – –




6. Determining the Data Driver and Schedule A Baseline Requirement for Operating Supplies:

The obligations per employee per month for operating supplies.

Item LastYear

ThisYear

Next Year


39. Total obligations for Supplies (Obligation chart 11). –

40. Obligations for Operating Supplies at 20% per Sam’s note (Line 39 x 20%). –

41. Number of employees (Chart 12). –

42. Obligations per employee per month for operating supplies (00.00) (Lines 40 ÷ 41) ÷ (12 months last year and 6 months this year. Next year increases by the inflation factor per Sam’s note.) DDDD

Calculating the Schedule A requirement for Supplies:

43. Number of supply months required (Arck memo and Sam’s note.) (Also see note below) –

44. Dollar requirement for GPCAT supplies—Schedule A (Lines 43 x 42) x (6 months this year and 12 months next year)

–

Note: A supply month is one month (or fraction thereof) of supplies for one person. For example: 6 persons hired for six months will require 36 months of supplies (6 x 6 = 36); Similarly, 3 persons hired for 5 months will require 15 months of supplies. The two groups together will require 51 months of supplies (36 + 15)




7. Determining the Schedule A Baseline requirement to purchase Furniture and Equipment:

Item Qty Cost Total

Calculating the Schedule A requirement for Furniture and Equipment: Chart 12

45. Workstations 22

46. Laptop computers 22

47. Printers 4

48. Copier 1

49. Fax Machine 1

50. Dollar requirement to purchase GPCAT Furniture and Equipment—Schedule A (Next year increases by the inflation factor per Sam’s notes)

– –



Module 4—Computing the Data Drivers

Chart 13Determine the following amounts:

Data Drivers Last Year This Year Next Year

1. Dollars per day for training travel N/C

2. Tuition dollars per participant N/A N/C

3. Operational travel obligations per travel day

4. Square feet per work station N/C

5. Obligations per square foot for rent & utilities ($00.00)

6. Number of phone lines per person (.00)

N/C

7. Obligations per phone line per month ($00.00)

8. Obligations per person per month for operating supplies ($00.00)

Your instructor will assist you in completing this table. However, the following data tables may be used to assist the student in computing the Data Driver amounts (above) and the resulting values to be entered on the succeeding Schedule A—GPCAT Baseline Estimated Requirements.



Module 4—Data Relationships Exercise

Chart 14

Table Number:___________

Schedule A—GPCAT Baseline Estimate for the FSC

Worksheet Estimate ($ Whole)

Items OCC This Year Next Year Total

1. Training Travel 21.0

2. GPCAT Audit Travel 21.0

3. Rent and Utilities 23.0

4. Communications 23.0

5. Training Tuition 25.0

6. Operating Supplies 26.0

7. Furniture and Equipment 31.0

8. Telephone Purchase 31.0

9. Initial Baseline Estimate



Module 4—Data Relationships Exercise

Chart 15

Table Number _____

Schedule B—Alternate to the Baseline Estimate for the FSC ($ Whole)

Items This Year Next Year Total

Initial Baseline Estimate (Schedule A—Chart 14)

Adjustments to the Baseline


Module 5Module 5Cost AnalysisCost Analysis

Exercises

49

Module 5—Cost Analysis Exercise—Present Value

Chart 16Table AThe present value of a single payment of $1 paid or received in the future

Project Year 3% Factors Project Year 4.5% Factors Project Year 8.0% Factors

1 0.9709 1 0.9569 1 0.9259

2 0.9426 2 0.9157 2 0.8573

3 0.9151 3 0.8762 3 0.7938

4 0.8885 4 0.8385 4 0.7351

5 0.8626 5 0.8024 5 0.6805

6 0.8375 6 0.7678 6 0.6301

7 0.8131 7 0.7348 7 0.5834

8 0.7894 8 0.7031 8 0.5402

9 0.7664 9 0.6729 9 0.5002

10 0.7441 10 0.6439 10 0.4631

50

Module 5 • Cost Analysis

Chart 17Table BThe present value of a series of equal payment of $1 paid or received in the future

Project Year 3% Factors Project Year 4.5% Factors Project Year 8.0% Factors

1 0.9709 1 0.9569 1 0.9259

2 1.9134 2 1.8726 2 1.7832

3 2.8286 3 2.7489 3 2.5771

4 3.7171 4 3.5875 4 3.3121

5 4.5797 5 4.3899 5 3.9927

6 5.4171 6 5.1578 6 4.5228

7 6.2302 7 5.8927 7 5.2063

8 7.0197 8 6.5958 8 5.7466

9 7.7861 9 7.2687 9 6.2468

10 8.5302 10 7.9127 10 6.7101



Cost Analysis Exercise—Calculates the Present Value of the Money Left in Your Savings

Chart 181. Assumes your existing savings remain untouched as a part of this action.

Examples: Option 1—Keep Clunker; Option 3—Finance; and Option 4—Lease

Computations for interest earned on $18,500 retained in your investment

account AmountInterestat 6%

Inflation Discount

at 3%PresentValue

Beginning balance first year 18,500 1,110 0.9709 1,078

Next year 19,610 1,177 0.9426 1,109

Next year 20,787 1,247 0.9151 1,141

Next year 22,034 1,322 0.8885 1,175

Next year 23,356 1,401 0.8626 1,209

Gross Interest Earned $6,257

Discounted Interest for 5 Years $5,712

2. Assume the $1,850 for the down payment comes from the $3,200 for Clunker. The remaining $1,350 goes to your savings.

Examples: Option 3 Finance

Computations for interest earned on $1,350 retained in your investment account Amount

Interestat 6%

Inflation Discount

at 3%PresentValue

Beginning balance first year 1,350 81 0.9709 79

Next year 1,431 86 0.9426 81

Next year 1,517 91 0.9151 83

Next year 1,608 96 0.8885 85

Next year 1,704 102 0.8626 88

Gross Interest Earned $456



Discounted Interest for 5 Years $416



3. Assumes the entire amount received for Clunker is added to your savings.

Examples: Option 2—Cash and Option 4—Lease

Computations for interest earned on $3,200 retained in your investment account Amount

Interestat 6%

Inflation Discount

at 3%PresentValue

Beginning balance first year 3,200 192 0.9709 186

Next year 3,392 204 0.9426 192

Next year 3,596 216 0.9151 197

Next year 3,811 229 0.8885 203

Next year 4,040 243 0.8626 210

Gross Interest Earned $1,083

Discounted Interest for 5 Years $988



Exercise 5-6—Cost AnalysisDecision: Keep “Clunker” or acquire a new car

Option 1. Keep “Clunker” for 60 months Amount P.V. TableP.V.

Factor P.V.

1. Annual Operating Expenses

2. Residual Value in 5th Year

3. Discounted Earnings on $18,500 savings

Net present Value (5 Years) – – –

Option 2. Purchase for Cash from Investments Amount P.V. Table

P.V. Factor P.V.

1. Cash Payment


3. Residual Value (Year 5)

4. Sell “Clunker”

5. Discounted lost earnings on $18,500 savings

6. Discounted earnings on savings from “Clunker”

Net Present Value (5 Years) – – –

Option 3. Finance—10% Down Amount P.V. TableP.V.

Factor P.V.

1. Down Payment (Purchase Price of $18,500)

2. Annual Car Payments


4. Residual Value (5th Year)




6. Discounted earnings on savings


Exercise 5-6—Cost Analysis (cont.)

Decision: Keep “Clunker” or acquire a new car

Option 4. Keep “Clunker” or acquire a new car Amount P.V. Table

P.V. Factor P.V.

1. Annual Lease Payments


3. Excess Mileage Charges (at lease end)


5. Discounted earnings on savings


Compare the monthly costs to commute to work under the four options

Comparison of Options (P.V. Analysis) P.V. @ 40% Monthly

Option 1. Keep “Clunker” for 60 Months

Option 2. Purchase for Cash from Investments

Option 3. Finance—10% Down

Option 4. Lease for 60 Months



Exercise 5-7—Maxi-Mail Decision

Decision: Acquire a machine or keep 4 FTPs

Option 1. As Is Amount P.V. TableP.V.

Factor P.V.

1. Personnel costs (4 FTEs)

2. Annual Equipment and Supplies Costs


Option 2. Purchase Outright Amount P.V. TableP.V.

Factor P.V.

1. Purchase Price

2. Annual Maintenance Contract

3. Personnel and Equipment Savings

4. Residual Value


Option 3. Lease to Ownership Amount P.V. TableP.V.

Factor P.V.

1. Annual lease to ownership payments

2. Annual Maintenance Contract

3. Personnel and Equipment Savings – – –

4. Residual Value

Net Present Value (5 Years)



Exercise 5-7—Maxi-Mail Decision (cont.)

Decision: Acquire a machine or keep 4 FTPs

Option 4. Straight Lease Amount P.V. TableP.V.

Factor P.V.

1. Annual Lease (Including Maintenance Contract)

2. Personnel and Equipment Savings


Present Value at 3.0% Table A Table B

Project Year 1 0.9709 0.9709

Project Year 2 0.9426 1.9134

Project Year 3 0.9151 2.8286

Project Year 4 0.8885 3.7171

Project Year 5 0.8626 4.5797


web viewmodule 3 • trend and variation analysis. module 4 • data relationship analysis....

Documents