Some of the uses of P/V ratio are listed below: • It measures the profitability of each product. • It helps the management in key ‘make or buy’ decision making process, expansion of product lines etc. • It helps in determining; variable cost, contribution, breakeven point, sales volume required to earn desired profit. • Fixing selling prices of products. • Deciding on most profitable line of products (assuming that there are no other limiting factors).
Just simple equations that can be easily adjusted to analyze a variety of situations. Cost is defined as product cost, labor, overhead, consisting of materials, etc. Volume is identified as quantity of units of sold products in a period of time. Profit is the (per unit/total) selling price minus cost. Generally, the greater the volume, the greater the total profit.
In such situations, items are produced in batches or lots instead of producing continually. The EPQ or EBQ model is the extension of EOQ model to find the optimal manufacturing batch size for semi-finished and finished goods. Similar to EOQ model, there is a cost trade-off in this model too. If the batch size is large, the average level of inventory of the product is also large and therefore the inventory carrying costs are high. Since a few of such large batches would suffice for the annual requirements, the number of set- ups would be small and the corresponding set up costs would be low.
Economic profit is a performance measure between return on invested capital and the cost of capital, multiplied by the invested capital. This calculation is based on the relationship between the cost of capital and operating profit. The following is an EVA calculation for Apple: According to the WACC calculation, Apple pays 7.56% on every dollar financed. This equals 7.56 cents per financed dollar. For every dollar that Apple spends on investments, they must make $.0756 plus the cost of the investment just for this to be practicable for the company.
The customer’s demand is expressed as a function of time, price and credit period which is appropriate for the products for which demand increases initially and after sometime it starts to decrease. In order to reduce the holding cost of supplier, the production is considered as one of the decision variable, which is directly proportional to the customer’s demand rate. The aim of this paper is to maximize the joint profit for supplier and retailer. Some numerical examples are demonstrated for validation of the developed mathematical model. Finally, implementing sensitivity analysis on the decision variables by varying the inventory parameters, effective managerial insight are generated which is beneficial for players of supply chain.
The characteristics of cost leadership, differentiation, and focus are defined before moving on to Coca-Cola’s generic strategy. It is revealed that Coca-Cola has a differentiation strategy that strives to have a unique price which costs more than some of its
(Editors of Encyclopaedia Britannica) For a nation to reach its prosperity maximum it was necessary to achieve trade surplus, i.e. an excess of exports over imports, while governments controlled for the accumulation of bullion through trading companies and associations. (Islahi 2008, p.
Price elasticity is calculated in the same way. The calculation is the elasticity for demand for labour equals the magnitude of the percentage change in the quantity of labour demanded divided by the percentage change in the wage rate. The demand for labour is less elastic in the short run, when only labour can be varied, than in the long run, when labour and other factors can be varied. The elasticity of demand for labour depends on the four laws of derived demand and other
Costs of the product/service under marginal costing method include ONLY variable production costs. Fixed costs are not allocated to the product and are booked directly to income statement as expenses. If the marginal costs are below the selling price, then the product is considered to be profitable and it is worth a production. 9.2.1. Scheme of profit and loss under marginal costing
Pujawan (2004) define economic life as juncture or point of time where yearly total cost (consist of equivalent yearly cost of investment as well as operational and maintenance yearly cost) on minimum point, on the other hand, service life is defined as period where assets can be operated well. In a competitive industry nowadays, maintaining assets effectively will be the key success factors of competing with other industries. The life of an assets can be viewed in different perspective. The question is when to stop using existing asset. The economic life of an asset may lengthen or shorten depends on how one is prepared to spend enough money for it.