Incremental savings

Related BrainMass Solutions

• Incremental Analysis Exercise

  Solution Template: (Note in dollars, not price per unit) Incremental cost to buy $- Incremental savings: Direct materials savings $- Direct labor savings $- Variable overhead savings

• What is incremental analysis? Provide an example, using numbers, of how incremental analysis might be used to make business decisions.

  Instead of additional costs, there will be a cost savings: Variable cost savings: (80,000 - 76,000) x $4 = $16,000 Step 4: List and clearly label each incremental revenue, incremental cost, and incremental cost savings.

• Incremental after-tax cash flows

  Year 5 Incremental Cost Savings 10,000 20,000 30,000 30,000 30,000 Incremental Depreciation 14,800 42,900 21,140 13,750 19,550 Profit Before tax (4,800) (22,900) 8,860 16,250 10,450 Tax (40%)

• Kim Mitchell, credit manager of Vinson is considering changes customer credit terms

  cost savings from the proposed change Current Proposed Incremental savings Discount Given $0 $0 $0 Discount rate*sales Amount in Receivables $650,685 $227,740 Cost of receivables $117,123 $40,993 $76,130 Contribution Margin $375,000

• Taxes: Present Value of the Incremental Benefits

  Determine the incremental depreciation between the old and new equipment and the related tax shield benefits. i.) Compute the after-tax benefits of the cost savings. j.)

• Activity Based Cost Accounting & CVP Excercise

  Solution Template: (Note in dollars, not price per unit) Incremental cost to buy Incremental savings: Direct materials savings Direct labor savings Variable overhead savings Fixed

• Dunbar Hardware: Maximum Price Per Share

  Dunbar's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million, and they have determined that the appropriate discount rate for valuing Eastern is 16%.

• incremental pre-tax profits

  B: Loss of contribution margin due to reduced sales = 500000*(1-60%)=0.2 million Incremental pre-tax profits from this proposal = +0.2786 million -0.2 million = 0.0786 million The positive sign indicates savings.

• Computing the Advantage to Making or Buying

  Because we are looking at incremental costs or savings, we need to compare the cost of outsourcing to the savings realized by not manufacturing the goods in-house.