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Chap 10

The document contains examples calculating depreciation expense, variable and fixed costs, gross profit, and gross margin for steel companies AK Steel and Nucor. It analyzes the companies' variable cost percentages, operating leverage, and impact of sales changes on gross profit. The document also provides a projection of sales, expenses, gross profit, and operating income ratio for a company over multiple years as sales increase.

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Khánh Linh Cao
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63 views5 pages

Chap 10

The document contains examples calculating depreciation expense, variable and fixed costs, gross profit, and gross margin for steel companies AK Steel and Nucor. It analyzes the companies' variable cost percentages, operating leverage, and impact of sales changes on gross profit. The document also provides a projection of sales, expenses, gross profit, and operating income ratio for a company over multiple years as sales increase.

Uploaded by

Khánh Linh Cao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Ex 10.

10:

a, AVR useful life = Gross PPE/Current Depn Exp

AVR usdeful life = 10.80 years

b, 3 steps to calculate total depn exp for year + 1

S1: Depn exp on existing assets = $ 4,453 Cost - Salvage


Useful life

S2: Depn exp on capital expenditure = $ 556

S3: Depn exp on for year + 1 = $ 5,009

c, PPE, at cost 48088 6000 54088


Acc Depn 30544 5009 35553
PPE, net 17544 18535

Ex 10.11:

a,
AK Steel VC % = 0.568 Variable Cost % = Change in COGS
Change in Sales

Total VC = 2963 Total VC = VC % * Sales

FC = 1591 Fixed Cost = Total cost - VC

Nucor VC % = 0.613
Total VC = 6974
FC = 2155

b, AK Steel %VC = 65%


Nucor %VC = 76%

Companies with less capital intensive usually higher variable cost percentage

c, AK Steel Sales of Year 4 = 5217

Year + 1 2 3 4 5
Sales 5478 6026 7231 6508 5206

VC (56.8% of Sales) 3112 3423 4107 3697 2957


FC 1591 1591 1591 1591 1591

Gross Profit 775 1012 1533 1220 658

Gross margin 0.14 0.17 0.21 0.19 0.13

Nucor Sales of Year 4 = 11377

Year + 1 2 3 4 5
Sales 11946 13140 15769 14192 11353

VC (61.3% of Sales) 7323 8055 9666 8699 6960

FC 2155 2155 2155 2155 2155

Gross Profit 9791 10985 13614 12037 9198

Gross margin 0.82 0.84 0.86 0.85 0.81


Operating Leverage cao, FC (capital intensive) cao hơn, Sale change thì
chịu nhiều rủi ro hơn -> Sales giảm rất mạnh về level thấp nhất
Fixed/Variable expense

Capital intensive (FC)


Operating LVR k cao, FC, rủi ro thấp, Sales k giảm nhiều
Ex 10.12:

2007 2008
Sales 8296 8871
COGS -5890 -6290
SE & AE -1670 -1714
Oprt I bef 618 867

a, VC % = 0.696
Total VC = 6174
FC = 116

b, VE % = 0.077
Total VE = 683
FE = 1031

c, Sales of Year 2008 = 8871

Year + 1 2 3 4
Sales 9936 10929 11803 12512

COGS VC (69.6% of Sales) 6915 7607 8215 8708

FC 116 116 116 116

SE&AE VE (7.7% of sale) 765 842 909 963

FE 1031 1031 1031 1031

Gross Profit 1108 1334 1532 1693

Gross margin 11.16% 12.21% 12.98% 13.53%

d, Oprt I bef IT/Sales ratio 0.087 0.079 0.073 0.069

e, The ratio decrease while Sales increase

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