Graded Unit 2 Watch

karooj
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Hi there,
I am a student of HND second year and I need help in my graded unit 2 project in the development stage. I am struggling in ABC to figure out
cost drivers for fixed overheads. Is anyone there to help, please????
You help would be highly appreciated.
Thank you!
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Elwak
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The cost drivers are easy to indentify once you split the fixed overheads into activities (cost pools). This is usually the first step. Once you have the cost pools you can then identify the cost drivers for the activity from the information given. Cost drivers are the 'causers' of the cost going up. Examples of cost pools and cost drivers are as follows; inspection fees = number of inspections, setup fees = number of machine setups, purchasing department costs = number of purchase orders and so forth
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karooj
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(Original post by Elwak)
The cost drivers are easy to indentify once you split the fixed overheads into activities (cost pools). This is usually the first step. Once you have the cost pools you can then identify the cost drivers for the activity from the information given. Cost drivers are the 'causers' of the cost going up. Examples of cost pools and cost drivers are as follows; inspection fees = number of inspections, setup fees = number of machine setups, purchasing department costs = number of purchase orders and so forth
Thank you so much for your reply. That is really helpful. I really appreciate you taking time to reply.
If it's not too much could you also help me in another bit as well, please?
I am struggling to find out closing the inventory of finished goods. Is that ay formula to figure out or any trick or something?
Plus, how to figure out the discount factor to calculate NPV and IRR?
Your time and help are highly appreciated.
Thank you!
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Elwak
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(Original post by karooj)
Thank you so much for your reply. That is really helpful. I really appreciate you taking time to reply.
If it's not too much could you also help me in another bit as well, please?
I am struggling to find out closing the inventory of finished goods. Is that ay formula to figure out or any trick or something?
Plus, how to figure out the discount factor to calculate NPV and IRR?
Your time and help are highly appreciated.
Thank you!
You are welcome.

1) inventory of closing finished goods = inventory of finished goods at the start + cost of goods manufactured - cost of goods sold

2) Discount factor for NPV calculation is usually 1/(1+r)^n where n is the period. For example when using a rate of 10% the discount factor for year one is 1/1.1 = 0.9091. Year 2 would be 1/1.21 = 0.8264 and so forth. With IRR, we usually take two guesses for the rates and calculate the respective NPVs. With this information we are able to extrapolate the rate at which NPV would fall to 0. There is usually a formula for IRR but the assumption is that NPV falls linearly as the discount rate increases.

Regards
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karooj
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(Original post by Elwak)
You are welcome.

1) inventory of closing finished goods = inventory of finished goods at the start + cost of goods manufactured - cost of goods sold

2) Discount factor for NPV calculation is usually 1/(1+r)^n where n is the period. For example when using a rate of 10% the discount factor for year one is 1/1.1 = 0.9091. Year 2 would be 1/1.21 = 0.8264 and so forth. With IRR, we usually take two guesses for the rates and calculate the respective NPVs. With this information we are able to extrapolate the rate at which NPV would fall to 0. There is usually a formula for IRR but the assumption is that NPV falls linearly as the discount rate increases.

Regards
Thank you very much, Elwak for your help. I have done master budget but I do not get the balance so i feel that i messed up the inventory part. Plus, i am making budget for 12 month and have cash deficit in cash budget for like 8 months (which is kinda too weird). I do not know how to figure out the working capital as it shows less liuidity. Any suggestions???


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Elwak
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With this one its hard to give a response without seeing the requirments for the question and your workings. From your description, its possible you errored on something.
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karooj
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Yeah, I know.... Anyways, thank you very much for the help.
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