Engineering Management

must show all the formulas

and all procedures. Answers must be typed, double

spaced, Times New Roman, 12 point font, with 1” margins.

1.The company’s warehouse has been busy taking in and shipping out vendor- supplied automotive parts. Table 6.13 shows the warehouse’s activities in eight consecutive periods, during which time the price of the parts has steadily increased.

TABLE 6.13

FIFO and LIFO Computation

Period Units In Unit Price Paid ($) Units Out

1 150 100 —

2 250 120 —

3 — — 180

4 — — 100

5 100 130 —

6 — — 200

7 100 140 —

8 — — 80

a. Determine the total LIFO prices for each stock withdrawal in periods 3, 4, 6,

and 8.

b. Repeat the same price computation using the FIFO technique.

2. A manufacturing company makes three products, A, B, and C. The fixed FO is $60,000, consisting of $10,000 for material handling, material waste, and procurement; $30,000 for rent and utilities; and $20,000 for safety and canteen costs. Other costs are shown in Table 6.16

a. Determine the product cost for products A, B, and C, using the ABC method.

b. If products A, B, and C are sold at $400, $350, and $150 per unit, respectively, what is the gross profit for each product?

c. What is the company’s total gross profit per month if all units produced are sold?

3. You are considering a good-looking Toyota hybrid car priced at $28,000 or an elegant GM luxury car at $24,000. The fuel efficiency is rated at 50 miles per gallon for the Toyota and 25 miles per gallon for the GM. The annual maintenance cost for both cars is about 0.5% of the car price. The gasoline in the local market is selling at $2.00 per gallon. The cars are to be driven about 10,000 miles per year. You plan to keep your car for five years only. At the end of the fifth year, the resale values of the Toyota and the GM are about 40% and 30%, respectively, of their original prices. The interest rate is 6%.

Which car is the better choice from the standpoint of costs?

4. Company X manufactures automotive door panels that may be made of either sheet metal or plastic sheet molding (glass fiber-reinforced polymer). Sheet metal bends well to the high-volume stamping process and has a low material cost. Plastic sheet molding meets the required strength and corrosion resistance and has a lower weight. The plastic-forming process involves a chemical reaction and has a slower cycle time. Table 6.18 summarizes the cost components for each. Assuming that the machinery and tooling have no salvage value at the end of their respective equipment lives, what is the annual production volume that would make the plastic panel more economical?

For production volume up to 536,156 panels per year, the plastic panels are more economical.

TABLE 6.18

Cost Components for Door Panels

Description Plastic Sheet Metal

Material cost ($ per panel) 5 2

DL cost ($ per hour) 40 40

FO ($ per year) 500,000 400,000

Maintenance expenses ($ per year) 100,000 80,000

Machinery investment ($) 3 million 25 million

Tooling investment ($) 1 million 4 million

Equipment life (years) 10 15

Cycle time (minutes per panel) 2 0.1

Interest rate (%) 6 6

5. Company X produces two products, A and B. Table 6.19 summarizes the cost structures of these two products over a three-month period. The company’s manufacturing operation is limited to 30,000 machine hours available per a three-month period. Furthermore, because of a prior sales commitment, the company must produce at least 1000 units of Product B. Determine the maximum profit the company can achieve in a three-month period.

TABLE 6.19

Cost Structures over Three Months

Product A Product B

Selling price ($ per unit) 10 12

Variable cost ($ per unit) 5 10

Fixed costs ($) 600 2,000

Machining time (hour per unit) 0.5 0.25

Product AProduct BProduct C

Number of Units Produced Per Month (-) 250400900

Total Material Costs Per Month ($) 500080004000

Labor Hours Per Unit (hr)43.51.5

Labor Rate Per Unit ($/hr) 252030

Machine Hour Per Unit (hr) 113

Sheet1

Garpah for EM2 Notes
Wye Self-Leveling
0 606.48 1543.2
5 3256.48 3909.7
10 5906.48 6276.2
15 8556.48 8642.7
20 11206.48 11009.202
Supply and Demand
Supply Demand A Demand B
10 1.8 7.8 9.5
15 3.1 5.6 7.3
20 4.5 4 5.7
25 6 2.8 4.5
30 8 2 3.7
35 3
0 US Treasury Bills 6.5
5 Bank CD 8
10 Industrial Bonds 10
15 Junk Bonds 25
TEXAS INSTRUMENTS FINANCIAL STATEMENTS TEXAS INSTRUMENTS COMPNAY INFORMAITON AND INDUSTRY DATA
Balance Sheets 1959 1958
December 31, 1958 and 1959 (Depreciation & amortizatioin: $8,135 $4,924 )
(thousands of dollars) (Preferred diidens dividends 102 0 )
(Other dividends 185 0 )
1959 1958
PAST RATIOS
Cash $17,856 $10,841 Fil in 1959 1958 1957 1956 1955 1954 1953
Receivables (net) 29,053 19,350 Current ratio 2 2 2.2 2.5 2 1.9
Inventories 23,282 6,869 Acid test 1.6 1.2 1.3 1.7 1.3 1
Prepaid expenses 664 315 Total debt to total assets 52.30% 47.90% 41.20% 30.40% 46.00% 53.30%
Payments received on govt. contracts -6,013 -405 Long-term debt as % of capitalization 26.50% 26.30% 16.80% 8.40% 8.30% 25.40%
————— ————— Total debt to net worth 1.1 0.9 0.7 0.4 0.8 1.1
Total current assets $64,842 $36,970 Days’ receivables (days) 75.7 66.3 82.2 96.7 81.9 65.5
Ending inventory turnover (sales) 13.4 7.8 7 7.6 8.1 5.7
Property, plant & equiment $60,806 $26,773 Ending inventory turnover (cost of sales) 8.8 5.5 5.1 5.5 5.7 4.1
Accumulated depreciatoin 20,083 10,281 Net property trunover 5.6 4.4 4.8 4 5.6 6.9
————– ————— Total assets turnover 1.7 1.8 1.7 1.5 1.6 1.8
Net property account $40,723 17,492 Net profit to total assets 11.20% 10.00% 8.60% 8.10% 7.90% 8.50%
Patents, etc. (net) 0 249 Net profit to net worth 23.40% 19.20% 14.60% 11.60% 14.70% 18.30%
Other assets 429 80 Net proft to net sales 6.50% 5.60% 5.10% 5.50% 4.90% 4.70%
————- ————— Gross profit 34.00% 29.50% 26.50% 27.40% 29,3% 29.20%
Total assets $105,994 $53,791
INDUSTRY INFORMATION
Accrued wages, pensions, taxes, etc. 21,309 10,696 Current ratio 2.3 2 2.1 2.1 2.2 1.6
Other current liabilities 5,589 2,867 Acid test 1.2 1 1 1 1.1 0.6
————— ————— Total debt to total assets 40.00% 52.80% 46.10% 47.20% 42.60% 56.10%
Total Currnet liabilities $37,266 $18,900 Long-term debt as % of capitalization 12.30% 16.70% 17.10% 14.40% 11.30% 7.80%
Total debt to net worth 0.7 1.1 0.8 1.1 0.7 1.3
Long-term debt 12,000 9,250 Days’ receivables (days) 44 45 42 42 39 33
Preferred stock 3,265 0 Ending inventory turnover (sales) 6.2 5.3 4.8 5.5 5.4 4.7
Common stock 3,915 3,257 Ending inventory turnover (cost of sales) 4.8 4.1 3.8 4.2 4.4 3.8
Paid in surplus 8,205 6,228 Net property trunover 8.7 10.1 7.1 8.4 9 12.2
Retained earnings 41,343 16,156 Total assets turnover 2 1.9 1.7 1.9 2 2.2
————— ————— Net profit to total assets 6.1 5.2 4.8 5.6 4.4 5
Total liabilities & net worth $105,994 $53,791 Net profit to net worth 10.20% 11.00% 9.00% 10.60% 7.70% 11.40%
Net proft to net sales 3.10% 2.70% 2.80% 2.90% 2.30% 2.30%
Gross profit 22.80% 21.70% 20.60% 23.20% 18.60% 19.90%
Operating Statements Number of companies Reported: 60 42 55 65 73 60
Years 1958 and 1959
(thousands of dollars) NOTE: Averages of compnaies of all sizes up t tpta assets of $10 million. 1953-56 compnaies manufacturing radios,
phonographs and electronic equipment, 1957-1958companies making electonic components and accessories.
1959 1958 The number of companies averaged each year is shown as the last item in each column.
Net Sales $193,213 $91,954 Source: Derived or adapted from Robert Morris Associates, Statement Studies, 1953 through 1958.
Cost of goods & services 128,434 60,776
—————– —————
Gross profit 64,779 31,178
Selling, general & admin. Expenses 26,369 13,844
Employee profit sharing & retirement 9,831 4,167
—————— —————
Total Overhead 36,200 18,011
Operating profit before interest & tax 28,579 13,167
Other income 956 273
—————— —————
Total IBIT 29,535 13,440
Interest paid 680 505
Taxable income 28,855 12,935
Income tax 14,712 6,934
—————— —————
Net income 14,143 6,001
Debt Valuation Vu
0 5 5
20 10 5
35 13 5
50 13.9 5
60 13 5
70 10 5
80 5 5
Product Life Cycle
Sales Profit
0 0 0
10 0 -10
20 5 0
30 15 5
40 27 15
50 38 18
60 41 12
70 38 6
80 28 3
90 16 0
100 0 -3
PUSH PULL
Communication Personal Selling Mass Advertising
Price High Low
Product’s Need of Special Service High Low
Distribution Selective Broad
One of 60 Curve
x F
0 60
1 40
2 26
3 17
4 12
5 9
6 7
7 5
8 3
9 2
10 1
85% Experience Curve
Production Quantity Production Cost
1 1
2 0.85
4 0.7225
8 0.614125
16 0.522006
32 0.4437
36 0.377145
72 0.32057
Price-Quality Correlation
Quantity Price QuantityT QuantityA
50 100 5 50 280
40 120 10 100 230
30 150 20 140 190
20 150 30 150 150
10 100 40 120 120
5 50 50 90 90
Suppy A Demand Supply B
10 1.8 7.8 0.5
15 3.1 5.6 1.8
20 4.5 4 3.1
25 6 2.8 4.6
30 8 2 6.5
35 8.5
Product F1 F2 F3 F4 F4 F6
P1
P1
P3
P4
Your Product
P5
P6
P7
Name Industry Partners Activities
MyAircraft.com Aerospace United Technologies buy and sell parts, manage
Honeywell supply and inventory, access
I2Technologies tech experts
Paperexchange.com Paper International Paper Buyers and sellers negotiate
prices and transact business
online
XSAg.com Agriculture Various agriculture Provide auction service online
companies for chemicals and seeds
ChemConnect Chemical Dow Chemical Buy and sell plastics and
Eastern Chemical chemical
Rohm & Haas
E-Steel Steel U.S. Steel Buy and sell steel products,
Worthington Industries search industrial information
Aug-96 500
Dec-96 650
Mar-97 800
Jun-97 1200
Sep-97 1500
Jan-98 1800
Apr-98 2150
Jul-98 2500
Dec-98 3000
Name Nature of Site
Amazon.com Product sales
Previewtravel.com Services
Mytimes.com Informantion
Ebay.com Customer value
epinion.com Custoemr empowerment
Thirdvoice.com Commentary
Blackboard.com Education
emusic.com Distribution
Macys.com Mixing online and offine stores
Respond.com Reverse auctions
mercata.com Viral marketing
Beenz.com Web currency
mysimon.com Companion shopping
B2C
1998 10
1999 20
2000 40
2001 60
2002 100
2003 190
2004 284
B C
B B2B B2C
GM/Ford Amazon
EDI Networks Dell
C C2B C2C
Priceline Ebay
Accompnay QXC
Work Users Home Users
Yahoo 49.70% 41.50%
MSN 34.1 27.1
Netscape 37.7 24.9
Excite 24.1 21.3
Lycos 24.1 18.3
Infoseek 23.8 15.8
Alta Vista 22.7 15.6
Snap 13 8.3
Hotbot 9.6 7.9
Growth of Web Sites
1993 50
1994 75
1995 100
1996 200
1997 1,100
1998 4,800
1999 8,500
Dimension Customer Relationship Management
Advertising Provide infomation in response to specific customer inquiries
Targeting Identifying and responding to specific customer behaviors and preferences
Promotions and Individually tailored to custopmer
Offering Discounts
Distribution Channels Direct or through intermediaries; customer’s choice
Pricing of products/ Negotaited with each customer
Services
New Product Features Created in respponse to customer demands
Measurements Used to Customer intention; total value of the individual customer relationship
Manage the Customer
Relationship
IH 8.392
Deere 4.933
Cataerpillar 7.612
PACCAR 1.882
IH 85.931
Deere 75.439
Caterpillar 88.253
PACCAR 140.156
IH 4.4
Deere 6.3
Caterpillar 6.5
PACCAR 6.4
IH 1.60
Deere 1.18
Caterpillar 1.40
PACCAR 2.54
Sales ($B) Net Income ($B) Gross Margin (%)
1977 5.975 0.203 17.95
1978 6.664 0.187 18.57
1879 8.392 0.3696 18.06
Sales ($B) Gross Margin (%)
1977 5.975 17.95
1978 6.664 18.57
1979 8.392 18.06
1977 3.455
1978 3.52
1979 3.582
1977 2.2
1978 1.8
1979 1.7
1977 0.57
1978 0.52
1979 0.49
Trucks 47.3
Agricultural Equipment 35.5
Construction Equipment 11.92
Turbo Machienery 4.24
United States 72.68
Canada 8.54
EU, Africa and Mid-East 13.8
Latin America 0.66
Pacific 4.3
1985 2000
US 300,000 150,000
Others 70,000 150,000
TOTAL 370,000 300,000
ABC MODEL FOR A SMALL MANUFACTURING COMPANY
Forging Press Hour Cost Machine Hour Cost Induction Heating Cost Material Movement Cost
Directly Depreciation Depreciation Depreciation Depreciation
Attributable Utilities Utilities Utilities Utilities
Costs Manufacutring Supplies Manufacutring Supplies Manufacutring Supplies Manufacutring Supplies
Outside Repairs Outside Repairs Outside Repairs Outside Repairs
Straight-time wages Straight-time wages
Fringe Benefits Fringe Benefits
Payroll Tases Payroll Tases
Overtime Premium Overtime Premium
Shift Premium Equipment Leases
Distributions Maintenance Maintenance Maintenance Maintenance
Buildings and Grounds Buildings and Grounds Buildings and Grounds Buildings and Grounds
Manufacturing Engineering Manufacturing Engineering Manufacturing Engineering Human Resources
Commodity Overhead Commodity Overhead Commodity Overhead Supervision
Supervision
Total Total Costs Total Costs Total Costs Total Costs
Rate $ Per Press Hour $ Per Machine Hour $ Per Heating Hour $ Per Move
EXAMPLE OF AN INCOME STATEMENT ($Million)
Year 2000 Year 2001
Sales Revenue (Net) 8,380.30 8,724.70
Cost of Goods Sold 6,181.20 6,728.80
Gross Margin 2,199.10 1,995.90
General, Selling and AdminIstrative Expenses 320.70 318.80
Pensions, Benefits, R&D, Insurance and Others 494.60 538.70
State, Local and Miscellenous Taxes 180.10 197.10
Depreciation 297.20 308.60
EBIT (Earnings Before Interest and Tax) 906.50 632.70
Interest and Other Costs Related to Debts 82.90 114.40
Taxable Income 823.60 518.30
Corporate Tax (32.05%) 264.00 (20.84%) 108.00
Net Income (NOPAT) 559.60 410.30
Common Stock Dividend 151.60 172.80
Retained Earnings 408.00 237.50
EXAMPLE OF A BALANCE SHEET ($Million)
Year 2000 Year 2001
ASSETS
Cash 231.00 245.70
Marketable Securities 450.80 314.90
Accounts Receivable 807.10 843.50
Inventories 1,170.70 1,387.10
Total Current Assets 2,659.60 2,791.20
Fixed Assets 11,070.40 11,897.70
Accumulated Depreciation 6,410.70 6,618.50
Net Fixed Assets 4,659.70 5,279.20
Long-term Receivaables and Other Investments 574.80 735.20
Prepaid Expenses 260.90 362.30
Total Long-term Assets 5,495.40 6,376.70
TOTAL ASSETS 8,155.00 9,167.90
LIABILITIES
Notes Payable 65.30 144.50
Accounts Payable 571.20 622.80
Accrued Taxes 346.30 275.00
Payroll and Benefits Payable 433.70 544.30
Long-term Debt Due Within a Year 30.40 50.80
Total Current Liabilities 1,446.90 1,637.40
Long-term Debt 1,542.50 1,959.90
Deferred Tax on Income 288.40 405.30
Deferre Credits 27.00 36.30
Total Long-term Liabilities 1,857.90 2,401.50
TOTAL LIABILITIES 3,304.80 4,038.90
Common Stock ($1.00 Par Value) 81.40 82.20
Capital Surplus 1,549.10 1,589.60
Accumulated Retained Earnings 3,219.70 3,457.20
TOTAL OWNER’S EQUITY 4,850.20 5,129.00
TOTAL LIABILITEIS AND OWNERS’ EQUITY 8,155.00 9,167.90
EXAMPLE OF A FUNDS FLOW STATEMENT ($Million)
2000-2001 %
SOURCES
Net Income 410.30 24.11%
Depreciation* 308.60 18.14%
Decrease in Marketable Securities 135.90 7.99%
Increase in Notes Payable 79.20 4.66%
Increase in Accouns Payable 51.60 3.03%
Increase in Payroll and Benefits 110.60 6.50%
Increase in Deferred Tax on Income 116.90 6.87%
Increase in Long-term Debt 437.80 25.73%
Increase in Common Stock and Capital 41.30 2.43%
Increase in Deferred Credit 9.30 0.55%
TOTAL SOURCE OF FUNDS 1,701.50 100%
USES
Increase in Plants and Equipment 928.10 54.55%
Dividend Paid 172.80 10.16%
Increase in Cash 14.70 0.86%
Increase in Accounts Receivable 36.40 2.14%
Increae in Inventories 216.40 12.72%
Increase in Long-term Receivables and Other Investments 160.40 9.42%
Increase in Accured Taxes 71.30 4.19%
Increase in Prepaid Expenses 101.40 5.96%
TOTAL USES OF FUNDS 1,701.50 100%
* Depreciation is a non-cash expenditure, which must be added back here to
represent a source of funds avialable to the firm
TYPICAL VALUES IN SELECTED INDUSTRIES
MANUFACTURING FIRMS
General Machienery Electric Apparatus Computer Iron & Steel
PERFORMANCE RATIOS
1. Current Ratios (-) 2.62 2.59 2.31 2.39
2. Net Income to Net Sales (%) 5.16 3.68 3.7 6.16
3. Net Income to Tangible Net Worth (%) 13.63 9.59 9.54 16.11
4. Collection Perioid (Days) 48 57 78 43
5. Fixed Asset to Tangible Net Worth (%) 39.1 41.6 31.4 56.4
6. Totoal Debt to Tangible Net Worth (%) 86.3 101.5 126.1 80.9
Reference: “Notes on Financial Analysis,” Harvard Business Case # 206-047 (1960).
Problem 3-1
ABC Company Income Statement ($1000)
Year 2001 Year 2000
Sales 330,000 395,000
Cost of Sales* 265,000 280,000
Gross Profit 65,000 115,000
Selling and Administrative Expenses 95,000 88,000
Other Expenses 4,000 35,000
Interest 2,000 3,000
Total Expenses 101,000 94,500
Profit (Loss) Before Taxes (36,000) 20,500
Federal Income Tax 0 10,000
Net Profit (Loss)** (36,000) 10,500
*Includes depreciation of $15,500,000 in 2000 and $15,000,000 in 2001.
**No dividents were paid in 2001
ABC Company Balance Sheet
Year 2001 Year 2000
Current Assets
Cash 18,500 17,000
Marketable Securities 0 5,000
Accounts Receivables 39,500 28,500
Inventories 98,000 113,000
Total Current Assets 156,000 163,000
Plant and Equipment (net) 275,000 290,000
Other Assets 3,000 8,000
Total Assets 434,000 461,500
Current Liabilities
Accounts Payable 34,500 18,000
Note Payable 20,000 25,000
Acrued Expenses 18,500 11,500
Total Current Liabilities 73,000 54,500
Morgate Payable 20,000 30,000
Common Stock 200,000 200,000
Earned Surplus 141,000 177,000
Total Liabilities and Net Worth 434,000 461,500
Debit Credit Debit Credit Debit Credit
(1) (2) (3) (4) (5) (6)
Explanations:
(1) Purchasing raw materials
(2) Putting materials into production processs
(3) Production is initiated, adding value to raw materials.
SOURCES OF FUNDS (4) Production is complete
Year 2000-2001 (5) Receiving of finished goods in storage
(6) Finished goods are shipped for sale
Decrease – Marketable Securities 5,000
Decrease – Inventories 15,000
Decrease – Other Assets 5,000
Increase – Accounts Payable 16,500
Increase – Accured Expenses 7,000
Decrease – Plant and Equipment 15,000
TOTAL SOURCES OF FUNDS 63,500
USES OF FUNDS
Increase – Cash 1,500
Increase – Accounts Receivable 11,000
Decrease – Notes Payable 5,000
Decrease – Mortage Payable 10,000
Net Loss for Period 36,000
TOTAL USES OF FUNDS 63,500
PERFORMANCE RATIOS FOR TEXAS INSTRUMENTS (1959)
Current Ratio 1.7
Acid Test 1.1
Total Debt to Total Assets 46.50%
Long-Term Debt as Percent of Capitalization 17.50%
Total Debt to Net Worth 0.9
DaysRreceivables 54.1 Days
Ending Inventory Turnover (Sales) 8.3x
Ending Inventory Tunove (Cost of Sales) 5.5x
Total Assets Turnover 1.8x
Net Property Turnover 4.7x
Net Profit to Total Assets 13.30%
Net Profit to Net Sales 7.30%
Gross Profit (Margin) 33.50%
INDUSTRIAL VRSUS CONSUMER PRODUCTS
1. Number of Buyers Few Many
2. Target Endusers Employers Self
3. Nature of Products Tailor-made, Technical Commodity, Non-techncial
4. Buyer Sophistication High Low
5. Buying Factors Techncial, Quality, Price, Price, Convenience,
Delivery, Service Packaging, Brand
6. Consumption OEM Parts for Resell, Direct consumption
Own Consumption
7. Producer Enduser Contact Low High
8. Time Lag Between Demand and Supply Large Small
9. Segmentation Techniques SIC (Standard Industrial Demographic, Life Style,
Classification), Size, Geogrpahy, Ethnic, Religious,
Geography, Enduser, Neighborhood, Behavior
Decisioin Level
10. Classification of Goods Raw Materials, Fabricated Conveniece (Household Supplies,
Parts, Capital Goods, Foods), Shopping (Cameras,
Accessory Equipment, Refrigeratros), Specailty (Foods,
OMR Supplies, Badged Brand Name Clothing)
Products
Debit Credit Debit Credit Debit Credit
Beg. 75 3 (b) Beg. 22 440 (f) Beg. 50
198 (a) 187 (c) 125 (d) 440 (f) 430 (g)
147 (e)
187 (c)
End. 83 (h) End. 41 (h) End. 60 (h)
Explanations:
(a) Purchasing raw materials by paying $198.00
(b) Receiving credit for having returned some materials purchased
(c) Direct materials actually shipped to WIP and used in the accounting period.
(d) Direct labor used and cost assigned.
(e) Factory overhead used and cost assigned.
(f) Product completed and transferred out to warehouse.
(g) Finished goods shipped out to customer, receiving CGS as credit.
(h) The sum of ending balances in Stores, WIP and FG represents Inventory
at the end of the accounting period.
ABC Model for a Service Department
TRADITIONAL ABC
Salaries $621,400 Key/Scan Claims $32,000
Equipment 161,200 Analyze Claims 121,000
Travel Expenses 58,000 Suspend Claims 32,500
Supplies 43,900 Receive Provider Inquires 101,500
Use and Occupancy 30,000 Resolve Member Problems 83,400
Process Batches 45,000
Total $914,500 Determine Eligibility 119,000
Make Copies 145,000
Writre Correspondence 77,100
attending Training 158,000
Total $914,500
IMPACT OF INVENTORY ACCOUNTING ON CGS
(Company has 5, buys 10, and uses 10 units)
FIFO LIFO Average
Beginning Inventory
5 * $100 500 500 500
Purchases and Value Added
5 * $200 1,000 1,000 1,000
5 * $300 1,500 1,500 1,500
Ending Inventory
5 * ……. 1,500 500 1,000
Cost of Goods Sold (CGS) 1,500 2,500 2,000
Problem 3-3
Transaction Current Ratio Working Capital
(1) 335/140 = 2.39, down y 0.11 unchanged
(2) unchanged unchanged
(3) 310/115 = 2.70, up by 0.2 unchanged
(4) 315/130 = 2.42, down by 0.8 $185,000, down by $10,000
(5) 335/130=2.58, up by 0.08 $205,000, up by $10,000
(6) 315/130 = 2.42, down by 0.8 $185,000, down by $10,000
(7) 335/145=2.31, down by 0.19 $190,000, down by $5,000
(8) 318/130 = 2.45, down by 0.5 $188,000, dowm by $7,000
(9) 310/127 = 2/44, down by 0.6 $183,000, down by $12,000
(10) 341.667/130=2.62, up by 0.12 $211,5667, up by $16,667
Texas Instruments Income Statement (Thousands of dollars)
1959 1958
Net sales $193,213 $91,954
Cost of goods & services 128,434 60,776
—————– ————–
Gross profit 64,779 31,178
Selling, general & admin. Expenses 26,369 13,844
Employee profit sharing & retirement 9,831 4,167
—————— ————–
Total Overhead 36,200 18,011
Operating profit before interest & tax 28,579 13,167
Other income 956 273
—————— ————–
EBIT 29,535 13,440
Interest paid 680 505
Taxable income 28,855 12,935
Income tax 14,712 6,934
—————— ————–
Net income 14,143 6,001
TEXAS INSTRUMENTS BALANCE SHEET (THOUSANDS OF DOLLARS)
1959 1958
Cash $17,856 $10,841
Receivables (net) 29,053 19,350
Inventories 23,282 6,869
Prepaid expenses 664 315
Payments received on govt. contracts -6,013 -405
————– ————–
Total Current Assets $64,842 $36,970
Property, plant & equipment $60,806 $26,773
Accumulated depreciation 20,083 10,281
————– ————–
Net property account $40,723 17,492
Patents, etc. (net) 0 249
Other assets 429 80
————- ————–
Total Assets $105,994 $53,791
Accounts payable $10,368 $5,337
Accrued wages, pensions, taxes, etc. $21,309 $10,696
Other current liabilities $5,589 $2,867
————– ————–
Total Current Liabilities $37,266 $18,900
Long-term debt $29,935 $9,250
Total Lliabilities $67,201 $28,150
Preferred stock $3,265 $0
Common stock $3,915 $3,257
Paid in surplus (capital surplus) 8,205 6,228
Retained earnings 23,408 16,156
————– ————–
Total Liabilities & Net Worth $105,994 $53,791
TEXAS INSTRUMENTS COMPANY INFORMAITON AND INDUSTRY DATA
$1,959 $1,958
(Depreciation & amortization: $8,135 $4,924 )
(Preferred dividends 102 0 )
(Other dividends 185 0 )
PAST RATIOS
Fill in 1959 1958 1957 1956 1955 1954 1953
Current ratio 2 2 2.2 2.5 2 1.9
Acid test 1.6 $1 1.3 1.7 1.3 1
Total debt to total assets 52.30% 47.90% 41.20% 30.40% 46.00% 53.30%
Long-term debt as % of capitalization 26.50% 26.30% 16.80% 8.40% 8.30% 25.40%
Total debt to net worth 1.1 0.9 0.7 0.4 0.8 1.1
Days’ receivables (days) 75.7 66.3 82.2 96.7 81.9 65.5
Ending inventory turnover (sales) 13.4 7.8 7 7.6 8.1 5.7
Ending inventory turnover (cost of sales) 8.8 5.5 5.1 5.5 5.7 4.1
Net property turnover 5.6 4.4 4.8 4 5.6 6.9
Total assets turnover 1.7 1.8 1.7 1.5 1.6 1.8
Net profit to total assets 11.20% 10.00% 8.60% 8.10% 7.90% 8.50%
Net profit to net worth 23.40% 19.20% 14.60% 11.60% 14.70% 18.30%
Net profit to net sales 6.50% 5.60% 5.10% 5.50% 4.90% 4.70%
Gross profit 34.00% 29.50% 26.50% 27.40% 29,3% 29.20%
INDUSTRY INFORMATION
Current ratio 2.3 2 2.1 2.1 2.2 1.6
Acid test 1.2 1 1 1 1.1 0.6
Total debt to total assets 40.00% 52.80% 46.10% 47.20% 42.60% 56.10%
Long-term debt as % of capitalization 12.30% 16.70% 17.10% 14.40% 11.30% 7.80%
Total debt to net worth 0.7 1.1 0.8 1.1 0.7 1.3
Days’ receivables (days) 44 45 42 42 39 33
Ending inventory turnover (sales) 6.2 5.3 4.8 5.5 5.4 4.7
Ending inventory turnover (cost of sales) 4.8 4.1 3.8 4.2 4.4 3.8
Net property turnover 8.7 10.1 7.1 8.4 9 12.2
Total assets turnover 2 1.9 1.7 1.9 2 2.2
Net profit to total assets 6.1 5.2 4.8 5.6 4.4 5
Net profit to net worth 10.20% 11.00% 9.00% 10.60% 7.70% 11.40%
Net profit to net sales 3.10% 2.70% 2.80% 2.90% 2.30% 2.30%
Gross profit 22.80% 21.70% 20.60% 23.20% 18.60% 19.90%
Number of companies Reported 60 42 55 65 73 60
NOTE: Averages of companies of all sizes up to total assets of $10 million. 1953-56 companies manufacturing
Radios, phonographs and electronic equipment, 1957-1958companies making electronic components
and accessories. The number of companies averaged each year is shown as the last item in each column.
Source: Derived or adapted from Robert Morris Associates, Statement Studies, 1953 through 1958.
Product A Product B Product C
Number of Units Produced Per Month (-) 250 400 900
Total Material Costs Per Month ($) 5000 8000 4000
Labor Hours Per Unit (hr) 4 3.5 1.5
Labor Rate Per Unit ($/hr) 25 20 30
Machine Hour Per Unit (hr) 1 1 3

Sheet1

10 10
15 15
20 20
25 25
30 30

Supply
Demand A
Quantity
Price ($/unit)
Equilibrium Price
1.8
7.8
3.1
5.6
4.5
4
6
2.8
8
2

Sheet2

US Treasury Bills
Bank CD
Industrial Bonds
Junk Bonds

Percentage (%)
Risk Premium
6.5
8
10
25

Sheet3

0 0
5 5
10 10
15 15
20 20

Wye
Self-Leveling
Quantity
$
AC Comparison
606.48
1543.2
3256.48
3909.7
5906.48
6276.2
8556.48
8642.7
11206.48
11009.202

0 0
20 20
35 35
50 50
60 60
70 70
80 80

Valuation
Vu
Debt to Equity Ratio (%)
Valuatoin of Firm ($/Share)
Optimum Leverage
5
5
10
5
13
5
13.9
5
13
5
10
5
5
5

0
1
2
3
4
5
6
7
8
9
10

F
Product Development Periods
Number of Products
One in 60 Product Development Curve
60
40
26
17
12
9
7
5
3
2
1

1
2
4
8
16
32
36
72

Production Cost
Production Quantity
Nominal Unit Cost ($/Unit)
BCG Experience Curve
1
0.85
0.7225
0.614125
0.522006
0.4437
0.377145
0.32057

0 0
10 10
20 20
30 30
40 40
50 50
60 60
70 70
80 80
90 90
100 100

Sales
Profit
Product Life (%)
$
Product Life Cycle
0
0
0
-10
5
0
15
5
27
15
38
18
41
12
38
6
28
3
16
0
0
-3

10 10 10
15 15 15
20 20 20
25 25 25
30 30 30
35 35 35

Supply
Demand A
Demand B
Quantity
Price ($/Unit)
Demand Shifting Due to Product Promotion
1.8
7.8
9.5
3.1
5.6
7.3
4.5
4
5.7
6
2.8
4.5
8
2
3.7
3

10 10 10
15 15 15
20 20 20
25 25 25
30 30 30
35 35 35

Suppy A
Demand
Supply B
Quantity
Price ($/Unit)
Supply Shift Due to Product Innovation
1.8
7.8
0.5
3.1
5.6
1.8
4.5
4
3.1
6
2.8
4.6
8
2
6.5
8.5

5 5
10 10
20 20
30 30
40 40
50 50

QuantityT
QuantityA
Price ($/Unit)
Quantity (Units)
Price Implication on Quality
50
280
100
230
140
190
150
150
120
120
90
90

35278
35400
35490
35582
35674
35796
35886
35977
36130

Number in ‘000
.Com Registration
500
650
800
1200
1500
1800
2150
2500
3000

1998
1999
2000
2001
2002
2003
2004

B2C
Year
$B
B2C Business Voume
10
20
40
60
100
190
284

1993 1993
1994 1994
1995 1995
1996 1996
1997 1997
1998 1998
1999 1999

Year
web site Count (k)
Growth of Web sites
50
50
75
75
100
100
200
200
1100
1100
4800
4800
8500
8500

IH
Deere
Cataerpillar
PACCAR

Companies
$ B
Annual Sales in 1979
8.392
4.933
7.612
1.882

IH
Deere
Caterpillar
PACCAR

Companies
$ K
Sales/Employee in 1979
85.931
75.439
88.253
140.156

IH
Deere
Caterpillar
PACCAR

Companies
%
Net Income/Sales in 1979
4.4
6.3
6.5
6.4

1977 1977
1978 1978
1979 1979

Sales ($B)
Gross Margin (%)
Years
$ B and %
International Harvester
5.975
17.95
6.664
18.57
8.392
18.06

1977
1978
1979

Years
IH Sales/Invertory Ratio
3.455
3.52
3.582

IH
Deere
Caterpillar
PACCAR

Companies
Sales/Asset Ratios (1979)
1.599
1.18
1.4
2.537

1977
1978
1979

Years
IH Current Ratio
2.2
1.8
1.7

1977
1978
1979

Years
IH Quick Ratio
0.57
0.52
0.49

Trucks
Agricultural Equipment
Construction Equipment
Turbo Machienery

Products
%
Sales by Product Group (1979)
47.3
35.5
11.92
4.24

United States
Canada
EU, Africa and Mid-East
Latin America
Pacific

Regions
%
Sales by Geographical Area (1979)
72.68
8.54
13.8
0.66
4.3

US US
Others Others
TOTAL TOTAL

1985
2000
GE Employment
300000
150000
70000
150000
370000
300000

Year %
65 1
66 1.5
67 4
68 3
69 4
70 6
71 5
72 3.9
73 4
74 10
75 12
76 7
77 5
78 6.5
79 8
80 14
81 12.5
82 10.5
83 4
84 4
85 3.95
86 3.9
87 2.2
88 4
89 4.5
90 5
91 6
92 3
93 3
94 2.9
95 3
96 3.2
97 3
98 3.2
99 2.9
0 2
1 1
Problem 2-5
YEAR SL SOYD DELTA F = ( 1 – t ) DELTA PRESENT WORTH
1 13333.3333333333 (6/21)80000 = 22857 9523.81 4761.91 4329
2 13333.3333333333 (5/21)80000 = 19048 5714.3 2857.15 2361.28
3 13333.3333333333 (4/21)80000 =15238 1904.8 952.4 715.54
4 13333.3333333333 (3/21)80000 = 11428.6 -1904.8 -952.4 -650.5
5 13333.3333333333 (2/21)80000 = 7619.05 -5714.28 -2857.14 -1774.06
6 13333.3333333333 (1/21)80000 = 3809.52 -9523.8 -4761.9 -2687.95
TOTAL $2,293.31
Problem 2-6
YEAR MAINTENANCE TRADE-IN ACCUMULATED TOTAL ACCUMULATED AVERAGE ANNUAL COST OF
COST VALUE DEPRECIATON EXPENSES OWNERSHIP & MAINTENANCE
1 1,000 24,000 16,000 17,000 17,000
2 2,000 21,000 19,000 22,000 11,000
3 3,000 18,000 22,000 28,000 9,333
4 4,000 15,000 25,000 35,000 8,750
5 5,000 12,000 28,000 43,000 8,600
6 6,000 9,000 31,000 52,000 8,667
Problem 2-7 A B C
Cost ($) 1,200 1,200 1,200
Weeks in Operation 10 10 13
Hours in Operation 1,680 1,680 2,184
% of useful life 70% 70% 91%
Depreciation Charge ($) 840 840 1,092
TOTAL $2,772
(Zero Salvage Value Assumed)
Problem 2-8 TYPE CONVENTIONAL AIR-SUPPORTED
First Cost ($) 200,000 35,000
Life (years) 40 8
Annual Maintenance ($) 1,500 5,000
Power & Fuels ($) 700 5,500
Annual Taxes *$) 1.5/100 1.5/100
Salvage Value ($) 40,000 3,000
Interest Rate (-) 0.08 0.08
Problem 2-9 WYE SELF-LEVELING
First Cost 5,500 7,000
Maintenance 250 500
Labor Cost 200+150+100+80= 200+150_200+160 =
530/mile 710/1/.5 miles =473.3/miles
N 20 10
Problem 2-10 Steam Electric
First Cost ($) $2,600,000 $2,800,000
Life (years) 25 30
Present Age (years) 18 30
Remaining Life (years) 7 30
Present Salvage Value ($) 800,000 0
Final Salvage Value 130,000 290,000
Annual Expenses 425,000 312,500
Problem 2-11 Project 0 1 2
A -10 30 10
B -5 5 20
C -5 5 15
Prolem 2-12 A B
Investment $500,000 $300,000
Profit year 1 150,000 50,000
Profit Year 2 200,000 150,000
Profit Year 3 250,000 200,000
Profit Year 4 150,000 300,000
Profit year 5 100,000 200,000
Problem 2-13 Design Cost Maximum Storage Capacity
A $500,000 1 Unit
B 625,000 1.5 Units
C 900,000 2.0 Units
Units Annual Rainfall Probability
0 0.10
0.1 to 0.5 0.60
0.6 to 1.0 0.15
1.1 to 1.5 0.10
1.6 to 2.0 0.04
2.0 or More 0.01
Traditional Analyses Risk Simulation
Single-valued x1% probablity that a given outcome
outcome (cost, (cost, time to completion) will not
Time to completion) exceed x2.
Minimum Outcome (x3)
Most Likely Outcome (x4)
Maximum Outcome (x5)
Standard Deviation as a overall
measure of project risk (x6)

STORES
WIP
FG
STORES
WIP
FG

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Inflation
Year
Percentage
US Consumer Price Index
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

US Consumer Price Index (Year to Year % Change)

Year

Percentage

Inflation

US Consumer Price Index (Year to Year % Change)
0
2
4
6
8
10
12
14
16
656769717375777981838587899193959799
Year
Percentage
Inflation

MBD0005D344.xls
Chart2

Inflation
Year
Percentage
US Consumer Price Index (Year to Year % Change)
1
1.3
3.8
2.8
4.1
6
5
3.8
3.9
10
12.05
7
5
6.5
8
14
12.5
10.5
4
4
3.9
3.8
2.5
4
4.5
5
6
3
3
2.8
3
3.2
3
3.2
2.9

investment

FOREIGN INVESTMENT UB HINA (YEAR-TOYEAR % CHANGE)

3/22/99

WSJ – 12/16/98

1 7

2 -5

3 22

4 -1

5 -12

6 -1

7 -4

8 1

9 5

10 12

11 17

investment

%
MONTH IN 1998
%
FOREIGN INVESTMENT YEAR-TO-YEAR PERCENTAGE CHANGE (WSJ-12/16/98)
0
0
0
0
0
0
0
0
0
0
0

ChinaTrade

China Trade Statistics

3/22/99

US Exports US Imports

72 0.1 0

73 0.7 0.1

74 0.8 0.1

75 0.3 0.2

76 0.1 0.2

77 0.2 0.2

78 0.8 0.3

79 1.7 0.6

80 3.8 1.1

81 3.6 1.9

82 2.9 2.3

83 2.2 2.2

84 3 3.1

85 3.9 3.9

86 3.1 4.8

87 3.5 6.3

88 5 8.5

89 5.8 12

90 4.8 15.2

91 6.2 19

92 7.5 25.7

93 8.8 31.5

94 9.3 38.8

95 11.7 45.6

96 12 51.5

97 12.8 62.5

98 14 71

99 15 80

US Exports US Imports

83 2.2 2.2

84 3 3.1

85 3.9 3.9

86 3.1 4.8

87 3.5 6.3

88 5 8.5

89 5.8 12

90 4.8 15.2

91 6.2 19

92 7.5 25.7

93 8.8 31.5

94 9.3 38.8

95 11.7 45.6

96 12 51.5

97 12.8 62.5

98 14 71

99 15 80

Wye Self-Leveling

0 810.187 1543.207

5 3460.187 3909.7

10 6110.187 6276.2

15 8760.187 8642.7

20 11410.187 11009.202

Wye Self-Leveling

0 0.81 1.543

5 3.46 3.909

10 6.11 6.276

15 8.76 8.642

20 11.41 11.009

Inflation

65 1

66 1.3

67 3.8

68 2.8

69 4.1

70 6

71 5

72 3.8

73 3.9

74 10

75 12.05

76 7

77 5

78 6.5

79 8

80 14

81 12.5

82 10.5

83 4

85 4

85 3.9

86 3.8

87 2.5

88 4

89 4.5

90 5

91 6

92 3

93 3

94 2.8

95 3

96 3.2

97 3

98 3.2

99 2.9

ChinaTrade

0 0

US Exports
US Imports
YEAR
$ BILLION
US-CHINA TRADE (DOC)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Hardwood

0 0

US Exports
US Imports
YEAR
$B
China Trade Statistics
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Tradedeficit

0 0

US Exports
US Imports
Year
$ Billion
China Trade Statistics
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0 0

Wye
Self-Leveling
Miles/Year
K$/Year
Annual Cost Versus Miles/Year
0
0
0
0
0
0
0
0
0
0

Inflation
Year
Percentage
US Consumer Pice Index (Year to Year % Change)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

HARDWOOD

Chinese Imports(1000 cum)

1997 1998 1999 2000

Logs 28 110 390 420

Lumber 833 1041 1200 1300

Annual 1Q 1Q (Logs+Lumber)

1995 65

1996 75

1997 125

1998 116 28 9.7

1999 34 15

Househod Decoration & Repair

YEAR $(MM) $(MM)

1991 $ 736.00

1992 $ 982.00

1993 $ 1,472.00

1994 $ 2,208.00

1995 $ 3,681.00

1996 $ 4,665.00

1997 $ 6,135.00

1998 $ 8,300.00

1999 $ 10,470.00

2000 $ 12,638.00

0 0

Logs
Lumber
YEAR
1000 CUM
Chinese Imports of Temperate Hardwood
0
0
0
0
0
0
0
0

0 0 0

Annual
1Q
1Q (Logs+Lumber)
Year
$ MM
US Hardwood Export to China
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0 0

Past
Future
Year
$(MM)
Household Decoration Expenditure
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Trade Deficit

China (+22.7%) $4.80

Japan (-28.7%) $4.66

Canada (+24.2% $2.71

NICS (179.8%) $1.58

Euro Zone (-38.6) $1.55

Mexico (+13.9%) $1.43

European Union (-65.5%) $1.12

Newly Industrized countries: Hong Kong, South Korea, Singpore, Taiwan

years to profit

TIME (YEARS) PROFITABILITY

1 TO 2 62.5

3 TO 5 12.5

5 TO 7 0

8 TO 10 6

OVER 10 19

POPULATION (MM)

NewRiches 2

Yuppies 60

Salary Men 330

Working Poor 800

1192

Population Retail Sales

16.90% 33%

83.10% 67%

Regions Population Retail Sales

High Retails Sales 16.90% 33%

Others 83.10% 67%

Trade Deficit
Countries
(% Change from Dec. 99)
$ Billion
US Trade Deficit (January 1999)

PROFITABILITY
TIME (YEARS)
% OF PROFITABLE VENTURES
YEARS TO PROFITABILITY

POPULATION (MM)

0 0

Population
Retail Sales
Chinese High Retail Sales Regions

Turn in your highest-quality paper
Get a qualified writer to help you with

“ Engineering Management ”

Get high-quality paper

Guarantee! All work is written by expert writers!

Still stressed from student homework?

Get quality assistance from academic writers!

Order now