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O  =:Using the Cigar Box] CB1: Profit calculations made easy by Olivier van Lieshout Global Facts www.globalfacts.nl 8^#8I0I[Contents$The five profit parameters Using CB1% " %`Part 1The five profit parameters Learning objectives: There are only five basic parameters. But these have many components. Know the difference between variable and fixed costs.~P " P& " nV " $|[Profit parametersThere are ONLY FIVE parameters P Price (per unit) VC Variable cost (per unit) q Quantity (in units per period) FC Fixed cost (per period) T Tax % of profit (per period) Note: q, FC, T must always refer to the same period. But&  5 (\Profit parameters: PriceThere are ONLY FIVE parameters, but& with many components! Price Z%5 G]Profit parameters: VC & FC`There are ONLY FIVE parameters but with many components! VC FC ^a ErProfit parameters: quantityJThere are ONLY FIVE parameters but with many components! q = actual quantity sold per period qCAP = quantity at full capacity utilization quantity/hour * hours/day * days/year (harvest season) 3 ton/hour * 22 hours/day * 90 days/yr = 5940 ton/year qBE = break-even quantity, where profit = 0XQntn,n F$(p)Recognize costs - exercisefIngredients Road tax Labels Bank charges Machine repair Raw material transport Depreciation Social taxglg Diesel for the boiler Electricity in the factory Electricity in the office Casual labor Management salary Detergents and gloves Interest on loans Carton boxeslProfit parameters (repetition)There are ONLY FIVE parameters P Price (per unit) VC Variable cost (per unit) q Quantity (in units per period) FC Fixed cost (per period) Tax Tax % of profit (per period) Not more!\   %Part 2Using CB1 Learning objectives: to be able to fill in the Cigar Box with five parameters; analyze the results; see the importance of capacity utilization.` $ " Zm " Z m PZ Sales price PGSales Price = Amount per unit, INCO-term City. Tomato paste price = USD 1000 per ton, DDP Moscow. DDP = delivered, duties paid. Delivered to Moscow in this case. The import duties in Russia are 10% or USD 100 per ton. Transport and commission amount to USD 144 per ton. Hence the Price EXW = 1000-100-144 = USD 756 per ton.HZHVariable cost VCEThree types of variable cost: VC1, cost of everything which is consumed: raw material and ingredients. VC2, cost of processing raw material into the finished product: energy, steam, casual labor, detergents, diesel, gas. VC3, cost of primary (jar, cap, label) and secondary (carton box, shrink wrap, pallet) packing material.x(x   _T Raw material & ingredients VC1The price of the raw material, delivered to the factory = 71/ton. The processing ratio is the quantity of raw material needed for one unit of finished good. Here: 6 kg tomato for 1 kg of paste. Raw material cost = 71 * 6 = 429 The higher the losses, the higher the processing ratio, the more costly the good. Calculate the cost of all other ingredients in the recipe: 12 VC1 = 429 + 12 = 441. BPP) Processing cost VC2qCalculating VC2 is not easy. Processing cost are calculated per hour. And divided by the production volume in units per hour. To arrive at the processing cost per unit. One must measure the use of steam, electricity, casual labor. Not just guess it! And measure the output per hour. Not just guess it! Get the correct data! After that, calculation is easy: 124 / 2 = 62rP< (  E)/Packing cost VC3Packing cost are calculated per sales unit: 1 aseptic bag in 1 steel drum = 3.2 + 18.6 = 21.8; Other examples of sales units: 24 bottles per carton = 24*(bottle + cap + label) + 1 box + 1 sticker; 10 sachets per bag = 10*sachet + 1 bag + 1 adhesive sticker Calculate the number of sales units per unit of calculation: unit of calculation is ton = 1000 kg 4.4 drums of 225 kg per ton: 1000 / 225 = 4.4 add the packing losses, say 2.2%, multiply 4.4 by 102.2% = 4.5 VC3 = cost of packing * number of packs per unit = 21.8 * 4.5 = 99,Z3ZZZ=ZZCZ3 #@Total variable cost VCVC = VC1 + VC2 + VC3 Finished good losses Warehouse losses, theft, pilferage, etc& . If there are 2% losses, enter 2% in FG losses % box. VC = (VC1 + VC2 + VC3) * (1+ FG losses %) VC = (441 + 62 + 99) * 1.02 = 614B*Z_ZLZ*_LMargin P VCMargin, or gross margin, is expressed per unit: Margin = P(EXW)  VC = 756  614 = 142B[Z&+4Margin % (P VC) / P * 100%Margin % = Margin / P(EXW) * 100% = 142 / 756 = 19% Margin % helps us to evaluate, if a margin is risky or not. Usual risk levels in food processing and manufacturing are:,ZbF.Contribution (P VC) * qThe volume, or quantity sold is expressed in units per period. In this example, 3600 ton of tomato based are sold. Contribution is expressed per period: Contribution = Margin per unit * quantity per period = = 142 * 3600 = 511,623fZZ-P T Fixed costsThree types of fixed cost: FC1, cost of investments: depreciation. FC2, cost of debts: interest. FC3, cost of all overheads. Salaries, social taxes, pensions, etc.. Repairs, maintenance Office & transport cost Marketing Etc& ..xbxfx  eDepreciation FC13Use a realistic value for the productive assets. For a tomato processing company this is about 1.8 million. Use a realistic depreciation rate. Here: the replacement period of the factory is 12.8 years. The depreciation = 1 / 12.8 * 100% = 7.8% FC1 = Asset value * depreciation % = 1,800,000 * 7.8% = 140,000V4 c y= Interest FC2Use the real amount of the debts, with a minimum of 40% of the asset value. For this company this is about 720,000 Use a realistic interest rate. Here: 18.7% per year. FC2 = Debt value * interest rate = 720,000 * 18.7% = 134,400@y &: Overhead FC3bEnter the number of full-time equivalent staff (FTE) 10 workers, working 6 months per year = 10 * 6/12 = 5 FTE 10 workers, working 4 months per year = 10 * 4/12 = Calculate their salaries, incl. all taxes and emoluments: 50,000 Calculate one lump sum amount for all other overheads: 20,000 FC3 = salaries + all other overhead = 50,000 + 20,000 = 70,000 5oZ5oK :Total fixed costs FC Profit Two methodsCost accounting method: Profit = Contribution  Fixed costs Bookkeeping method: Profit = Total revenues  Total costs Result is the same!Summary Cost price  Break-even&Break-even point is where the profit is zero. Revenues  Cost = 0 or Contribution  Fixed cost = 0 Why calculating the break-even quantity? When Price, VC and FC are known and q is unknown How many drums can be sold per year? BE volume (sales) = minimum volume needed to sell to make a profit. BE volume (raw material) = minimum volume needed to process. How much raw material do we need to buy?,jn)n2n%nn)n %<)  Capacityq = quantity sold = 3,600 tons of paste per year qCAP = quantity produced at full capacity utilization quantity/hour * hours/day * days/year (harvest season) 2 ton/hour * 22 hours/day * 110 days/yr = 4,840 ton/year utilization = q / qCAP * 100% = 3,600 / 4,840 = 74.4%  nnzn6nn   0 A  - ! Capacity utilizationHow does capacity utilization affect the Cost Price? the higher the utilization %, the higher the q (sales). the higher the q, the lower the FC/q, VC does not change, hence the lower the cost price. How does capacity utilization affect the Profit? the higher the capacity utilization, the more the units sold and the lower the cost price, thus the higher the profit per unit. 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3ff~""___PPT10".p^?+ظ:D?"' = @B D!' = @BA?%,( < +O%,( < +DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<* %(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<* %(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*)%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*)8%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*8O%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*O\%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\g%(D ' =%(D ' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*1%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*1K%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*KX%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*Xj%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*j%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+8+0+ + K \(  x  c $(M }     c $$; `<$0  H  0޽h ? 3ff~___PPT10i.`t+[W_D' = @B D' = @BA?%,( < +O%,( < +DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4R%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*Ru%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*u%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*%(+8+0+ +ML0 R(  ~  s *&&wf    s *,w  "_H  0޽h ? 3ff~___PPT10i.P+D=' = @B +O$ N    4[ (  4 4 <A?"0@NNN?Nd 4 S Z<$0  $v  4 0E D,$0 TVCZv  4 0tJ  4,$0 TFCZv  4 0XY c `) ,$0 pq contribution.< v  4 0R S,$0 XprofitZv 4 0k  Jz ,$0 VP-VCZv 4 0t   ,$ 0 aprofit per unitZv 4 0~  , ,$ 0 \ Break-even < v 4 0؀  ,$ 0 fCapacity Utilization<vH 4 0޽h ? 3ff~,$___PPT10. p0^+ˁD' = @B D' = @BA?%,( < +O%,( < +DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<* 4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<* 4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<* 4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<* 4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<* 4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4 %(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*4%(++0+4 ++0+ 4 ++0+ 4 ++0+ 4 ++0+ 4 ++0+4 ++0+4 ++0+4 ++0+4 + P jbL(  Lr L S  M }    L S ; ` <$D0   L <A?"6@`NNN?N 'H L 0޽h ? 3ff~___PPT10.1+YDn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*L0%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*L0d%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*Ld%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*L%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*L%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*LH%(+2  Q T\(  Tx T c $M }    T c $; `,<$D0  H T 0޽h ? 3ff~___PPT10.1+YD' = @B Du' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*Tg%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*Tg%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*TF%(+ R vnJ\(  \x \ c $M }    \ c $;, <$D0   J\ <A?"6@`NNN?N- CH \ 0޽h ? 3ff~___PPT10.1+YDn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\B%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\B%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\5%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\5s%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*\s%(+D S vnl(  lx l c $LM }    l c $H;Ts <$D0   l <A?"6@`NNN?N T,H l 0޽h ? 3ff~vn___PPT10N.1+YD"' = @B D' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*lF%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*lF~%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l~%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l.%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l.r%(+  T vn0t(  tx t c $M }    t c $ <$D0   t <A ?"6@`NNN?N_ CH t 0޽h ? 3ff~RJ___PPT10*.1+YD' = @B D' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t,%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t,_%(DL' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t_~%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t~%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t>%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t>c%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*tc%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*t%(+ V vnp(  x  c $M }     c $ <$D0    <A ?"6@`NNN?N ''H  0޽h ? 3ff~___PPT10.1+YDn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<**%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<**T%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*T%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+ U vnP|(  |x | c $M }    | c $ <$D0   | <A ?"6@`NNN?N{  ,H | 0޽h ? 3ff~___PPT10.1+YD~' = @B D9' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*|0%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*|0[%(+ X zr  (  x  c $M }  r   c $ <$D0    HKMA?"6@`NNN?N}:c ,$D0  HQ!/A?"6@`NNN?N6 U ,$D0   HJA ?"6@`NNN?N >X,$D0   N]VRA?"6@`NNN?N,,,$D0H  0޽h ? 3ff~___PPT10.1+PD' = @B De' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*4%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*4q%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*q%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<* %(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<* %(+T W vn (  x  c $5M }     c $6<$D0    <A?"6@`NNN?N v H  0޽h ? 3ff~ ~ ___PPT10^ .1+YD2 ' = @B D ' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*?%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*?s%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*s%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+ Y P(  r  S FM }     S G; `<$D0  H  0޽h ? 3ff~___PPT10.ptS+YDr' = @B D-' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*C%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*Ca%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*a}%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*}%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D' =%(Dh' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+ Z z(  r  S [M }     s \0e0e #" 0e; 6 <$D0    <A?"6@`NNN?N kvH  0޽h ? 3ff~___PPT10.S+ksDn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*1%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*1l%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*l%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*4%(+  [ 0(  x  c $0mM }     s ,n0e0e #" 0e;  <$D0    <A ?"6@`NNN?N@ #,H  0޽h ? 3ff~___PPT10.S+YDn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*4%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*4L%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*Ls%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*s%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+ \ @(  x  c $M }     s 0e0e #" 0e; `<$D0    <A?"6@`NNN?N yA'  N?"0@NNN?Ng,$0 =3.3 FTE0H  0޽h ? 3ff~C;___PPT10.S+ D' = @B Dr' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*5%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*5o%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*o%(DA' =%(D' =%(D' =A@BBBB0B%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*#%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*#b%(+8+0+ += ] #   (  r  S M }      0e0eA     5% 8c8c     ?A)BCD|E|| "0e@`    @ABC DEFGHIJK5%LMNOPQRSTUWYZ[ \]^_ `abN 5%  N 5%  N    5%    !"?N@ABC DEFGHIJK5%LMNOPQRSTUWYZ[ \]^_ `abH  E  0 ,$D0 1FC = FC1 + FC2 + FC3 FC = 140,000 + 134,400 + 70,000 = 344,400 The contribution of tomato paste must exceed these costs. In case more than 1 product is produced, FC must be shared. Calculate FC % attributed to product and enter in the box: 100% FC (attributed to product) = FC * FC % attributed to productB2Z` H  0޽h ? 3ff~___PPT10.PbPT+ Dn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*?%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*?y%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*y%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*2%(+f ^ (  r  S M }     S T; `<$D0    B?A?"6@`NNN?N`dC ,$D0  Be~A?"6@`NNN?N dX,$D0H  0޽h ? 3ff~ ~ ___PPT10^ .+MqD2 ' = @B D ' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*<%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*<v%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*v%(+x    (  r  S M }     0伆 ; ` Q!Cost price = total cost per unit  @`    0e0eA     5% 8c8c     ?A)BCD|E|| "0e@`    @ABC DEFGHIJK5%LMNOPQRSTUWYZ[ \]^_ `abN 5%  N 5%  N    5%    !"?N@ABC DEFGHIJK5%LMNOPQRSTUWYZ[ \]^_ `ab ^ H  0޽h ? 3ff~___PPT10i.P]+D=' = @B +l _ .(  r  S HɆM }     S Ɇ;q <$D0    <A?"6@`NNN?N I,,$D 0H  0޽h ? 3ff~vn___PPT10N.0ǰ+~&խD"' = @B D' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*.%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*.j%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*j%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*.%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*.k%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*k%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+ ` .(  r  S 4܆M }     S 0݆; ` <$D0    <A?"6@`NNN?N I,$D0H  0޽h ? 3ff~___PPT10.7+R;dDn' = @B D)' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*8%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*8n%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*n%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(+ a b(  r  S M }     S ,;`Y<$D0   H  0޽h ? 3ff~___PPT10.rry+YD' = @B DU' = @BA?%,( < +O%,( < +D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*6%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*6o%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*o%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*>%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*>~%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*~%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*A%(D4' =%(D' =%(D' =4@BBBB%(D' =1:Bvisible*o3>+B#style.visibility<*A%(+ 06(  0~ 0 s *,s&wf s x 0 c $\-sw s H 0 0޽h ? 3ff~___PPT10i.=6+D=' = @B + 0 &  0H (  H^ H S D     H c $sD 0l  TL___PPT9.& P Dear Teacher and Student, This Power Point presentation uses a TEACHER S HANDOUT. Teachers should follow the guidelines provided as exactly as possible. Please follow five simple rules: Questions are underlined. Take time to wait for an answer. Get everybody s involvement. Don t try to save time by allowing Miss WiseGirl to always give the answers. Probe other students as well. Suggestions to write on the whiteboard (or blackboard, whatever is available) are bold italic. Use your own experience to expand. Don t skip questions/answers/exercises. Don t click before it is indicated. Ensure that all exercises in PART 1 and PART 2 are calculated on paper, use of a calculator is allowed. For PART 3, however, a laptop/PC is mandatory. This will lead to the best results. Some exercises and slides are OPTIONAL. In the interest of time they may be skipped, or given to be reviewed at home. Your feedback is welcomed. For more information, please visit www.globalfacts.nl/cigarbox. Good luck! Olivier van Lieshout Global Facts" #|, 9 ><|+H H 0޽h ? 3380___PPT10.,0 (  ^  S D     c $?D 0   }Click1-4. read aloud. Question: Is this clear? Emphasize that you are going to demonstrate that profit calculation is simple; that the students should rigidly utilize and fill the formulas provided. Repeat that the real challenge is to obtain correct data. After this: Click5-6. read aloud. Click7. Part 3 is about the Cigar Box. Explain that the Cigar Box is a simple, one screen Excel sheet, developed to make profit calculation and analysis easy and accessible to everybody. The Cigar Box is freeware. Everybody can use, share and modify it. More information can be downloaded from www.globalfacts.nl/cigarbox. Click8-10. read aloud. Z~I %9IH  0޽h ? 3380___PPT10.y`5`0  (  X  C D     S ND 0   " H  0޽h ? 3380___PPT10.,0Q Z [0    j (   X   C D       S VD 0   l  Click1. Question: there are only five parameters that you need to calculate profit. Can you list them? Write CORRECT answers on the whiteboard. After answers are exhausted: Click2-3. read aloud. Explain that both P (price) and VC (variable cost) are always expressed per unit of product. Provide examples from your own experience: price of bread per loaf, price of maize per bag, price of sugar per kg. VC of a bottle of water, per bottle; VC of a leather bag, per bag; etc. Click4. read aloud. Explain that it is international convention to write q in small letters, as opposed to the others, which are written in CAPITAL LETTERS (you can t help it either!). Provide examples, such as: number of bags sold per month; quantity of dolls produced per day; etc. Click5. read aloud. Stress that FC is always expressed per period. Provide examples, such as: rent per week, salaries per month; marketing cost per quarter; taxes per year. etc. Click6. read aloud. Explain that T refers only to profit tax, it is expressed as a % of the profit. Other taxes, like land tax, road tax, social taxes are included in the fixed costs. Click7. read aloud. Explain that it is not possible to work with a quantity per month, while using the fixed costs per year. Click8. read aloud.lW)z H   0޽h ? 3380___PPT10.,py x\0 @<(  <X < C D    < S pD 0   &Click1. but, with many components. Click2. First let s look at the price of a product. When invoiced, a price must always state the INCO-term and the place. Write on whiteboard.  The price is $18 CIF Rotterdam . Question: what does this mean? After answers: Click3. The delivery terms are called INCO-terms, they are standardized by the International Chamber of Commerce. In profit calculations, we work only with EXW, the Ex Works price. This is the net price we receive to pay the goods from the factory. All delivery costs, transport, port handling, insurance, commissions have to be subtracted from the invoiced price to arrive at the Ex Works price. I suggest, in the interest of time, not to elaborate this point. You can refer to the other ACCESS! Module dealing with INCO-terms. H$QH < 0޽h ? 3380___PPT10.4`Xm]0 P@(  @X @ C D    @ S D 0   9Click1. Variable costs usually have three components. Question: who can remember them? After answers: Click2. Read aloud all three categories. How these VCs are exactly calculated is explained in PART 3. Click3. Fixed costs also have three components. Question: who can remember them? After answers: Click4. Red aloud all three categories. How these FCs are exactly calculated is explained in PART 3. Click5. Read aloud. Summarize this slide by stating that this is the real challenge of profit calculation: to obtain correct information. This is the topic of PART 3. 6:66^H @ 0޽h ? 3380___PPT10.5 r0 +#`D(  DX D C D   # D S D 0   }Click1. q (we always small letter, unlike the other symbols which are in CAPITAL LETTERS). q= the actual quantity sold in a certain period (not the quantity produced!). Usually per year. Click2. q CAP is a reference figure: how much can we maximally produce (and thus sell) per year? Question: who knows the formula for calculating the maximum capacity. After answers: Click3. read the formula aloud. Click4. This is an example. (If you wish, you can make more examples on the whiteboard). When ready: Click5. q BE is the break-even quantity sold, that is: the quantity where the profit is zero. This will be further explained in PART4. $~ZH D 0޽h ? 3380___PPT10.6p0 tl(  ^  S D   f  c $`D 0   XQuestion: How many parameters influence profit after tax? Write CORRECT answers on the whiteboard. After answers; Click1. Five! Question: Which parameters are these? And are theyexpressed per period or per unit? After answers; Click2-6 and read aloud Click7. But& (continue without asking questions) d-2'4 [ rH  0޽h ? 3380___PPT10.,K0 RJ(  X  C D   J  S hD 0   Click1. Read aloud. Click2-9. Read aloud and let students answer. Answers: 1=VC, 2=FC, 3=VC, 4=FC, 5=FC, 6=VC, 7=FC, 8=FC Click10. Let students write the answers on paper, maximally 2 minutes. Review the answers: 9=VC, 10=VC, 11=FC, 12=VC, 13=FC, 14=VC, 15=FC, 16=VC. OPTIONAL Assess the score of the students. If the average score is below 75% (6 good answers per student), repeat the operation using the first block. $B\H  0޽h ? 3380___PPT10.02 (0  8(   d   c $D      s *D 0   " H   0޽h ? 3380___PPT10.@R0 zr`@ (  @X @ C D   r @ S ÚD 0   Show the Cigar Box. Explain that there are 2 columns and 8 boxes. In the left column, all amounts are per unit; in the right column, the amounts are per period. In the left column in this example, the unit is USD per ton. Others are: KES per lb; Euro per drum; etc. In the right column in this example, the unit is USD per year. Obviously the currency in both columns must be the same. === The example here, is for profit calculation of tomato paste, 25 Brix, processed from fresh tomatoes of 4.5 Brix. Tomato paste is packed in aseptic bags of 220 kg, packed in a steel drum. One Cigar Box sheet must be used for single product only. For two products, two sheets must be used. For three products, three sheets, etc. Please note that all data are entered in blue, while the formulas are in black. This helps to make changes in the future: ONLY CHANGE BLUE FIGURES. === Click1. Box 1 is to calculate the ex works price. Click2. Box 2 is to calculate the variable cost. VC1, VC2 and VC3. The % of VC1, VC2 and VC3 is a very useful benchmark to analyze the efficiency of a factory. Point to the % on the right of the figures. Click3. Box 3 calculates the margin per unit and the margin %. All figures are black, so in this box there are only formulas. The margin in this example is P-VC = 756  614 = 142; the margin % = 19%. Click4. In box 4, you enter the quantity sold (3600 ton of tomato paste per year). Next, the margin per unit multiplied by the quantity sold per year results in the contribution of tomato paste per year: 142 * 3600 = 511,623. Contribution is not the same as profit, because & . Click5. & . because the fixed costs still need to be paid. Box 5 is used to calculate the fixed costs of a company. Once this is done the profit can be calculated: Profit = Contribution  Fixed costs = 511,623  344,400 = ? Click6. & . a profit of 167,223, or a profitability of 6%. In box 6 the EXW Revenues and the Total costs are also given. Profit is thus calculated in two ways: a) Revenues  Costs and b) Contribution  Fixed costs. Click7. In box 7 the cost price per unit and the profit per unit are calculated. This box serves for analysis. Click8. Box 8 also serves for analysis: the break-even volume for both finished goods (sales) and for the required inputs (raw material) are calculated. Click9. Finally, the Cigar Box helps with capacity utilization calculation.\K Pf' $ ]IJ     [H @ 0޽h ? 3380___PPT10. 0 P(  PX P C D    P S D 0   Click1-6. Read aloud. Point to the box with the appropriate number. OPTIONAL: Make other examples. E.g. with VAT, without VAT, etc.H P 0޽h ? 3380___PPT10.0{ 0 n f X(  X^ X S D   ` X c $$D 0   Click1. Read aloud. Explain: that for food products, consumption means eating. For non-food products, like a leather bag, consumptions means used. For food products, the composition of VC1 depends upon the recipe determined by a food technologist in the factory and it is usually checked by the laboratory. This is standard procedure. The main cost component is of course the raw material: the apple in the apple juice, the cucumber in the pickles, the tomato in the tomato paste. The minor components are the ingredients: sugar in the jam, salt in the ketchup, oil in the tinned fish, etc.) === OPTIONAL: ask students to give examples of raw material and of ingredients. Click2. Read aloud. Explain: VC2 have long been denied as important. Steam, water, electricity and casual labor, were all very cheap. In the recent years almost all governments have stopped subsidizing gas/fuel/water which has led to spectacular price increases. And increases in the cost price, increase in VC2. This triggers change in behavior: insulation of cooking equipment, recycling of hot water. It is only the beginning, but the trend is clear: companies saving on VC2 with efficient equipment and operations will be more competitive. === OPTIONAL: ask students, who have companies, which measures they have taken to reduce VC2. Click3. Read aloud. Explain: VC3 is straightforward. Primary plus secondary packing cost. These costs are easy to get: price of the glass bottle, the cap, the label, the carton box, the shrink foil. What is less obvious is the availability of good quality packing material. Export quality packing material must often be imported and paid for in foreign currency and this is not always easy. === OPTIONAL: ask students, who have companies, what packing material they use, and where they get it. P&      1      g   xH X 0޽h ? 3380___PPT10.0{0 \T`(  `^ ` S D   N ` c $4D 0   HClick1-6. Read aloud. Point to the box with the appropriate number. Explain: the percentage cost of the raw material is 70%, ingredients only 2%. In other words, if a cost saving is needed: first try to lower the cost of the raw material: Either with a lower RM price, or a more efficient processing ratio. OPTIONAL: 1. Ask students to give examples of recipes of food products and distinguish between the cost of raw material and ingredients. 2. Ask students to give examples of  recipes of non-food products: Leather lady s bag. Bicycles. Again, distinguish between the cost of the main raw material (leather, steel pipes) and other parts (zippers, buttons, light, tires).~<-  3 H ` 0޽h ? 3380___PPT10.0{>0  pN(  p^ p S D    p c $PD 0   DClick1-4. Read aloud. Write on the whiteboard the formula: cost per hour / units per hour = cost / unit. Question: is this formula understood? After answer. Click5-9. Read aloud. Explain: The percentage cost of the processing is 10%. This is not very high, compared with VC1. But, compared , ingredients only 2%. In other words, if a cost saving is needed: first try to lower the cost of the raw material: Either with a lower VC2 use, or a higher productivity. Z<4 H p 0޽h ? 3380___PPT10.0{y 0 @x(  x^ x S D    x c $D 0l  TL___PPT9.& #!Click1. Read aloud. Question: What is a sales unit? Answer: the unit in which the product is packed and sold. After answer. Click2. Explain: the sales unit of tomato paste is a drum of 220 kg. The paste is packed aseptically in a plastic bag, sealed and then lifted into a galvanized steel drum. The cost of which is 3.2 for the bag and 18.6 for the drum. Click3. Read aloud. === OPTIONAL Question: Write is two examples of sales unit for food products and two examples of sales units for non-food products? Check the answers. After answer. === Click4. Read aloud. Question: what is the unit of calculation in the current example? After answers: Click5. Read the answer aloud. Question: how to calculate the number of sales units per unit of calculation? After answer: Click6. Read the answer aloud. Click7. Read aloud. === OPTIONAL Question: A bottle weighs 100 grams and 24 bottles are packed in a crate. What is the unit of sales? Answer: the crate. How many crates in a ton? Answer: 1000 / (0.100 * 24) = 1000 / 2.4 = 416.7 === Question: The percentage cost of the packing is 16%. If a cost saving is needed, how can you reduce VC3? Answer: you can only lower VC3 with lower prices of the packing material needed or reduce the packing losses. If this is not possible, then different packing is needed. Zz" ZZ    L  *  .  D  h   AA  C   (  +   b      -  !   xH x 0޽h ? 3380___PPT10.0{q0 `(  ^  S D     c $ğD 0   wClick1-3. Read aloud. Question: What is the purpose of calculating the margin % ? After answers: Click4. Read aloud. Question: what is a reasonable margin? After answers: Click5-7. Read aloud. Explain: these percentages have to be taken as guidelines. HW kxH  0޽h ? 3380___PPT10.0{Q0 a(  ^  S D     c $}D 0   WClick1. Read aloud. Click2. Read aloud. Question: what are finished good losses? Answer: Losses of the packed product, ready to be sold. Question: how can finished good losses occur? After answers: Click3-6. Read aloud. H(!2MxH  0޽h ? 3380___PPT10.0{N0 ^(  ^  S D     c $춪D 0   TClick1-2. Read aloud. Explain: Quantity sold is usually the most difficult parameter to estimate. Click3-5. Read aloud. Question: Is contribution the same thing as profit? Answer: NO, because the fixed costs still need to be paid for!6z,9xH  0޽h ? 3380___PPT10.0{h0 x(  ^  S D     c $֪D 0   nClick1. Read aloud. Question: What is the purpose of calculating the margin % ? After answers: Click2. Read aloud. Question: what is a risky margin? After answers: Click3. Read aloud. Click4. Read aloud. Explain: when the margin is below 15%, a small reduction in the sales price, will lead to a negative margin. That is why this margin % is only acceptable if all parameters are fully under control. E.g. in when producing under a contract with fixed prices. If understood: Click5. Read aloud. Explain. The Cigar Box uses a traffic light system: RED = danger/stop! ORANGE = warning/improve! GREEN = safe/continue! Click6. Read aloud. Click7. Read aloud. Explain: all these percentages have to be taken as guidelines. lW  xH  0޽h ? 3380___PPT10.0{0 wP(  X  C D   w  S ުD 0   Click1. Question: What are the three types of fixed cost? After answers: Click2. Read aloud. Explain that the term depreciation, like the other terms will be explained in the next slides. Click3-8. Read aloud.$H  0޽h ? 3380___PPT10.@0 OG`(  X  C D   G  S 8D 0   }Click1-6. Read aloud. To reduce the cost of depreciation is not possible. Once an investment in a factory has been made, the depreciation cost is fixed. For advanced reading: FC1. Depreciation. Owners and management have a tendency to conveniently forget to depreciate. And lower their cost price. This results into lack of cash for future investments, even for replacement investments. The Cigar Box suggests to include always a realistic amount of depreciation, which, if saved on a separate account, will enable the entrepreneur to make the future investments needed. Purchase value minus residual value at the end of the economic life, divided by the number of years. The economic life depends on the costs for maintenance and repairs, which tend to increase over time. The equipment should be replaced when annual repair and maintenance costs become higher than the annual depreciation. H~< hH  0޽h ? 3380___PPT10.Ll 0   p| (  X  C D      S D 0   ~  Click1-2. Read aloud. To reduce FC2, either the loan amount or the interest rate must be lowered. Of course, interest rates fluctuate, but to reduce the interest is very difficult. Once an loan has been taken to finance the factory operations, FC2 is usually fixed. For advance reading: FC2-interest. Question: why use a debt amount of at least 40% of the asset value? Answer: a healthy balance sheet shows a debt-equity ratio of at least 40-60. Higher % of debt also happens: 50-50 and even 60% debt  40 equity. The reason for this is the use of the leverage factor in financing. If the interest paid for debt is lower than the profitability, then debt capital should be used to increase the return on equity. If the interest paid for debt is higher than the profitability, than less debt money must be used. See text books on finance for further understanding. FC2. Interest. This cost is usually transparent as bank loans are usually hidden. Interest rates can be as high as 25% per year. Shortage of working capital is often the result of the fact that the owners believe that they will not be able to repay the working capital loans at such interest rates, which is a clear proof that education in cost pricing is still very much needed. n <0}p qH  0޽h ? 3380___PPT10.pq 60 F(  X  C D     S D 0   HClick1. Read aloud. Question: what means FTE exactly? After answers: Click2. Read aloud. Explain that these 10 workers work 50% of the time, hence they count as 5 fulltime workers. Click3. Read aloud. Question: this equals how many FTE? After answers: Click4. Explain: Explain that these 10 workers work 33% of the time, hence they count as 3.3 fulltime workers. Click5. Read aloud. Explain that the 50,000 is just an assumption. Exact calculations are needed from the bookkeeping. Click6. Read aloud. Explain that the 20,000 is just again an assumption. Exact calculations are always needed from the bookkeeping. Click7. read aloud. To reduce FC3 is a matter of cost control and thus good management. lMH  0޽h ? 3380___PPT10. g;0 e](  X  C D   ]  S |&D 0   qClick1-2. Read aloud. Click3. Read aloud. Question: What if the contribution is lower than the fixed costs? Answer: Losses will occur! After answers: Click4-6. Read aloud. Explain: the way fixed costs are divided over a portfolio of products is the subject of Cigar Box 2: Portfolio Analysis. More information can be found on the website: www.globalfacts.nl/cigarbox. Hr*:j SH  0޽h ? 3380___PPT10.0 ((  X  C D     S GD 0`  H@___PPT9" >Question: Do you know which two methods exist for calculation of the profit? After answers: Click1. Read aloud. Click2. Explain the earlier obtained figures. Click3. Read aloud. Click4. Explain, writing on the whiteboard that Revenue equals P * q = 756 * 3600 = 2,711,600 Total cost equals VC * q + FC = 614 * 3600 + 344,400 = 2,210,400 + 344,400 = 2,554,377 Profit = Revenues  Total cost = 2,711,600  2,554,377.H" H  0޽h ? 3380___PPT10.t4 0 2 *  (  X  C D   *   S RD 0   Question: what is the meaning of  breaking even ? After answers: Question: What is a break-even point? After answers: Click1-2. Read aloud. Question: what is the name of the first method of profit calculation? Answer: the bookkeeping method. Question: what is the name of the second method of profit calculation? Answer: the cost accounting method. If this clear: Click3. Read question aloud. Answer: click4, read aloud. Explain: click5. in this example: how many drums of tomato paste can be sold per year? In other words: click6, read aloud. Question: In order to be able to sell, the factory must first& & ? Answer: Produce! Question: And in order to be able to produce, the factory must first& & ? Answer: Buy raw material! Click7. Read aloud. Click8. Click9. The Cigar Box automatically calculates both BE sales and BE raw material. Question: these BE s are expressed in what? Answer: in units per period: tons of paste per year, tons of tomato per harvest, etc& 9C>?K: A$RVpH  0޽h ? 3380___PPT10.l 80 zr (  X  C D   r  S (gD 0   Question: A factory can never sell more than what? Answer: than the maximal installed capacity! Click1. Read aloud. Explain: The question is can the factory produce this 3,600 tons? In order to know this, we must calculate& . Click2. Read aloud. Question: what are the three factors, you need in order to calculate q CAP? After answers.. Click3. Read aloud. Click4. Explain: in this example, the factory can process 12 ton of tomato into 2 ton of paste per hour. The factory can work maximally 22 hours per day, because it needs 2 hours for cleaning and small repair work. The tomato harvesting season is 110 days. Because industrial tomatoes cannot be stored, the 110 days is also the length of the production season. Hence 4,840 tons of paste can maximally be produced. Click5. Read aloud. Explain: this factory works at 74% capacity utilization.RPSH  0޽h ? 3380___PPT10.oд0  (  X  C D     S 聫D 0   mOPTIONAL. This is a test slide to find out if the students have understood the basics of profit calculation. $nPH  0޽h ? 3380___PPT10.rr<ę :5m ' O_zE<@= 0t ,@JF$' P L]giyR  u#,ݪ/S36Q7CU&<\UeJo< ?DkQVZ~`pkrtw Oh+'0T! hp   , 8DL,Business Approach to Enterprise DevelopmentOlivier van LieshoutNetworkOlivier van Lieshout109Microsoft PowerPoint@@@M[=@ap4Gg  F  --$--'--% t `--'@Arial-.  2 1."System-3f--F$!>G<G:H8I6J5L4N3P3R3T4V5X6Z8[:\<]>]@]B\D[FZGXHVITIRIPHNGLFJDIBH@G>G--'--F$!]G[GYHWIUJTLSNRPRRRTSVTXUZW[Y\[]]]_]a\c[eZfXgVhThRhPgNfLeJcIaH_G]G--'--F$!|GzGxHvItJsLrNqPqRqTrVsXtZv[x\z]|]~]\[ZXVTRPNLJIH~G|G--'--F$!>f<f:g8h6i5k4m3o3q3s4u5w6y8z:{<|>|@|B{DzFyGwHuIsIqIoHmGkFiDhBg@f>f--'--F$!]f[fYgWhUiTkSmRoRqRsSuTwUyWzY{[|]|_|a{czeyfwguhshqhogmfkeichag_f]f--'--F$!|fzfxgvhtiskrmqoqqqsruswtyvzx{z|||~|{zywusqomkihg~f|f--'f--F$!ffghikmoqsuwyz{|||{zywusqomkihgff--'3f--F$!><:86543334568:<>@BDFGHIIIHGFDB@>--'--F$!][YWUTSRRRSTUWY[]_acefghhhgfeca_]--'f--F$!|zxvtsrqqqrstvxz|~~|--'--F$!--'--F$!--'3f--F$!><:86543334568:<>@BDFGHIIIHGFDB@>--'f--F$!][YWUTSRRRSTUWY[]_acefghhhgfeca_]--'--F$!|zxvtsrqqqrstvxz|~~|--'--F$!--'f--F$!><:86543334568:<>@BDFGHIIIHGFDB@>--'--F$!][YWUTSRRRSTUWY[]_acefghhhgfeca_]--'--F$!|zxvtsrqqqrstvxz|~~|--'--F$!--'--F$!--'f--F$!><:86543334568:<>@BDFGHIIIHGFDB@>--'--F$!][YWUTSRRRSTUWY[]_acefghhhgfeca_]--'--F$!|zxvtsrqqqrstvxz|~~|--'--F$!--'--F$!><:86543 3 34568:<>@BDFGHII I HGFDB@>--'--F$!][YWUTSR R RSTUWY[]_acefghh h gfeca_]--'--F$!|zxvtsrq q qrstvxz|~  ~|--'--F$!    --'--F$!] [ Y!W"U#T%S'R)R+R-S/T1U3W4Y5[6]6_6a5c4e3f1g/h-h+h)g'f%e#c"a!_ ] --'--F$!  !"#%')+-/13456665431/-+)'%#"!  --'--%!44--'@Arial-. 3f%2 OUsing the Cigar Box0%)))%/)%0)%1.-@Arial-. :2 u"CB1: Profit calculations made easy      " .-@Arial-. *2 tby Olivier van Lieshout       .-@Arial-. 2 $ Global Facts   .-@Arial-. ~"2 Ywww.globalfacts.nl    .-~-^^-՜.+,D՜.+,x    $ On-screen ShowACC Business Creation BV~ #ArialTimes New Roman WingdingsNetworkUsing the Cigar Box ContentsPart 1Profit parametersProfit parameters: PriceProfit parameters: VC & FCProfit parameters: quantityRecognize costs - exerciseProfit parameters (repetition)Part 2 Slide 11Sales price PVariable cost VCRaw material & ingredients VC1Processing cost VC2Packing cost VC3Total variable cost VC Margin PVCMargin % (PVC) / P * 100%Contribution (PVC) * q Fixed costsDepreciation FC1 Interest FC2 Overhead FC3Total fixed costs FCProfit Two methodsSummary Cost price Break-even CapacityCapacity utilizationLets practice!  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