ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.22 : An engineering company intends to produce a small piece of biochemical instrument for sales. Let A = overall fixed cost of production, B = variable cost of production per unit, C = selling price per unit, D = quantity of unit produced. Breakeven Analysis is used where revenue = cost. (a) Explain the role of Breakeven Analysis by using A, B, C and D. (b) Find the value of Contribution Margin in term of A, B, C and / or D. (c) At the breakeven point where revenue = cost, derive an equation of D as a function of A, B and C.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.23 : An engineering company would like to produce 10000 units of control instruments. Let selling price per unit = $10, variable cost per unit = $2, overall fixed cost = $30000. (a) Calculate the income obtained when all units are sold out successfully. (b) Find the overall cost of production. (c) Calculate the percentage of gross profit obtained based on the answers in (a) and (b). (d) Find the minimum units that need to be sold out successfully in order to prevent losses. (e) How many minimum units of instruments that need to be produced in order to prevent losses, if all units produced are sold out successfully?

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.24 : (a) The net present value of an engineering project is given by V. Let Q = summation of [ T / (1 + I) ^ N ] from N = A to N = B, where P = project cost, T = tax inflow, N = duration. If V = P + Q where P = -$1000, T = $275, I = 0.12 (means 12 % , capital cost of project per year), A = 1 year, B = 5 years, calculate the value of V. (b) The present value tax shields are W = $ (11.9725, 9.1486, 6.5579, 4.1811, 2.0005) in 5 beginning balances of an engineering project. Find the adjusted present value of the engineering project X, when X = V + (summation of the values of W).

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.25 : (a) If an engineering company has a policy to maintain A % debt ratio, it will limit its total debt B, to A % of all company assets with total assets C. Find the value of A as a function of B and C. (b) An engineering consultancy that designs biochemical processing plants has a beginning balance in a bank of value D. The interest paid by the bank to the consultancy for the saving is E. The consultancy withdraws F amount of money from the bank to cover the project cost. (i) Calculate the end balance in a bank of the consultancy by using the symbols of D, E and F etc. (ii) Find the value of the principal due to E and F.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.26 : In a construction accounting for a biochemical processing plant, $A has been spent to date, and another $B is expected required to complete the construction project. The biochemical processing plant is expected to generate a total revenue of $C. Calculate the : (a) estimated total costs; (b) percentage completion of project; (c) total estimated profit; (d) profit to date.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.27 : A biochemical engineering consultancy applies construction accounting in its finance. Its project began on 1 January 2010. Total revenue generated from the project was $9000. On 1 January 2011 as the budget, $2000 had been spent, with $6000 expected. However, the project cost increased latter, causing deviation from its initial budget on 1 January 2012, where $7000 had been spent, with $1400 expected. Let (estimated total cost) = (spent cost) + (expected cost to be spent), (percentage completion) = 100 (spent cost) / (estimated total costs), (total expected profits) = (total revenue) - (estimated total costs). Calculate : (a) total expected profits on 1 January 2011 and 1 January 2012; (b) estimated total cost as and not as the budget; (c) percentage completion of the project since the project began, in the first and second years.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.28 : In the development of a small engineering facility for biochemical processing, completed contract method is applied in its construction accounting. In a short contract period, let the (contract price) = A. Let the (costs to date) = B; (estimated cost to complete) = C. (a) Find the values of : (i) estimated total costs; (ii) total estimated profit; (iii) percent completion to date. (b) If the project contract is 100 % completed : (i) find the total gross profit recognized; (ii) what is the exact numerical value of C?

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.29 : An engineering company that produces small biochemical tools applies Installment Sales Method in its accounting. Let A = Installment Sales, B = Cost of Installment Sales, C = Gross Profit, D = Gross Profit Ratio. In year 20X8, let A = $400, B = $250, C = $150. In year 20X9, let A = $450, B = $315, C = $135. If the value of D = 37.5 % in year 20X8 : (a) find the value of D for year 20X9; (b) calculate the realized gross profit = ED / 100, for year 20X8 when the cash collected from sales is E = $100.

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ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.30 : A biochemical engineering sales contract adopts Cost Recovery Method in its company accounting. Gross profit is realised only when cash collections exceed the total cost of goods sold. Let Y = Original Cost Recovered, Z = Gross Profit Realised. Its property was sold at A = $500k with cost of B = $300k. Its engineering accountant receives cash of C = $240k in first year, D = $180k in second year and E in third year. (a) Find the values of Y and Z in : (i) first year; (ii) second year; (iii) third year. (b) What is the exact value of E if all cash has been fully received from sales?

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.31 : In a biochemical engineering company, let the actual revenue generated = A, actual cost incurred = B. According to the standard budget, the revenue generated = C, cost incurred = D. (a) Find the profit according to : (i) actual situation; (ii) standard budget. (b) Calculate the Variance Due to Price and Efficiency in : (i) revenue generated; (ii) cost incurred; (iii) profit. (c) If E > F where > represents : more than, find the 4 pairs of values of E and F in favorable conditions.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.32 : In the calculation of the total cost of production of an engineering material, a linear equation Y = MX + C could be applied. Let T = total cost, F = fixed cost, V = variable cost, Q = quantity produced, W = variable cost per unit produced. Form a linear equation that relates : (a) T, F and V; (b) V, Q and W.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.33 : An engineering corporation that produces a type of healthy food has A number of shares of $B preferred stock and C number of shares of $H common stock outstanding. In a typical financial year, let the net income obtained = D. The amount retained by the corporation = E. (a) Calculate the amount of money distributed to the shareholders if : (i) D > E; (ii) D = E; (iii) D < E. (b) Let preferred dividend = F, common dividend = G, CH > G. Find the values of F and G, in term of A, B, D and / or E when : (i) (D - E) > AB; (ii) (D - E) < AB; (iii) (D - E) = AB.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.34 : A biochemical engineering company has stock P = 20,000 shares of M % preferred stock of Q = $100 par and N number of shares of $20 par common stock. In year 1 : $10,000 is distributed as dividend. In year 2 : $25,000 is distributed as dividend. Let (Total Dividend) = (Dividend for Preferred Stock) + (Dividend for Common Stock). (a) In year 1, calculate the amount distributed as dividend for preferred stock, when no dividend was distributed for common stock. (b) In year 2, the amount distributed for common stock was $5000. Find the values of M and N, when the dividend per share for common stock is $0.05.

ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.35 : A voluntary accountant is performing Du Pont Analysis for a charitable engineering organization. References for 3-step Du Pont formula are : (ROE) = (Net Income $) / (Equity $), where ROE is Return On Equity. (ROS) = (Net Income $) / (Sales $), where ROS is Return On Sales. (Asset Turnover) = (Sales $) / (Assets $). (Leverage) = (Assets $) / (Equity $). From the balance sheet and income statement, the company has Assets of $3753.19 this year and $3216.86 last year. Sales for this year is $2292.34. Let ROE = 0.37 and ROS = 0.21. (a) Calculate the Asset Turnover of the organization. (b) Find the value of the organizational Leverage. (c) Calculate the Net Income $ of the organization.