| A. Decision Making Process – make-or-buy, sell-or-process further, special order situations, changes in production lines, incremental costing implications, cost-volume-profit analysis, imputed costs, opportunity costs, sunk costs, postponable costs, avoidable costs, no excess capacity vs. no alternative use considerations, discretionary costs.
B. Cost/Profit/Volume Analysis for Decision Making – utilization of incremental costing, principle behing incremental costing, nonquantitative factors, elements of break-even analysis, breakeven point, relevant range, margin of safety, unit contribution margin, contribution margin ratio, calculation of breakeven point in units and dollars, operating leverage, gross margin vs. contribution margin, sensitivity analysis, reliability limitations of breakeven analysis, costing systems best for breakeven analysis, sales volume to achieve desired level of profit, decrease in breakeven point, after-tax vs. pretax considerations, allocation of corporate fixed charges.
C. Investment Analysis - capital budgeting, components of net investment cost, economic life, depreciable life, effect of capital method on prioritization of capital investment alternatives, application of sensitivity analysis to capital budgeting, time value of money, present value, future value, annuities, ordinary annuity vs. annuity due, conversion factor from ordinary annuity to annuity due, future value determination of ordinary annuity vs. annuity due, pay back, net present value, internal rate of return, profitability index, accounting rate of return, rate used for discounting in net present value calculations, effect of increased discount rate on net present value calculations, discount rate’s relationship to internal rate of return, net present value vs. internal rate of return, assessing risk of an investment proposal, relationship of marginal tax rate to expected cash flows from an investment proposal, impact of depreciation methods on discounted cash flow, impact of working capital requirements on discounted cash flow, cash flow considerations on sale of an asset, net present value vs. profitability index, salvage value, components of net investment cost, accepting or rejecting investment proposals, limitation of the net present value method, hurdle rates, cash flow reinvestment rate, certainty equivalent net present value, risk-free rate, advantage of net present value over internal rate of return, relationship between profitability index and net present value, profitability index greater than 1.0, net present value in an inflationary environment, cost of capital, internal rate of return calculation,cash flow reinvestment rate under internal rate of return method, calculation of payback period, advantages and disadvantages of payback period, payback reciprocal, bail-out payback, breakeven time, calculation of accounting rate of return, comparison of accounting rate of return with net income.
D. Marginal Analysis and Pricing – make-or-buy decisions, disinvestment decision process, optimal production/purchase strategy, short-term profit maximization, eliminating low margin sales from contribution margin, sell-or-process further decisions, special orders in excess capacity vs. alternative use situations.
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