Running head: MO TOM ART
1
Mo Tom Art Student’s Name
Institution
MO TOM ART
2 Mo Tom Art
Step I; pattern of operating profits (or losses) Year
1984
1985
1986
1987
1988
263,828
112,314
-96,699
-94,345
-526,092
Trend of SF Expense
1,172,933
1,665,769
1,892,499 1,870,782
2,161,220
Trend in Net Variable Revenues
2,885,969
3,828,255
4,086,667
3,940,799
4,298,748
Trend in Total Fixed Expense
1,449,208
2,050,172
2,290,867
2,164,362
2,653,620
Trend of Operating Profit
The operating profit has shown a downward trend over the years. The figures of the operating profit have continued to decline up to a stage where the figures are negative as shown from year 1986 through the year 1988. This may be caused by the increasing trend of both the total fixed expenses and the SF expenses which are increasing at a higher rate as compared to the rate at which net variable revenue increases, (Cataldo II,). The operating profit in year 1984 was 263,828 as compared to the -526,092 during the year 1988 which shows that the profit continued to decrease. The figures that seem to be odd are the figures in the year1987. The value 1,870,782 in the year 1987 shows a downward trend as compared to the figure 1892499 for the year1986 while all the other years have shown an upward trend as it can be seen from 1,172,933 during the year 1984 and 2,161,220 in the year 1988 as well as in all the other years, (Laidig, 2010). Step 2; detailed semi fixed expenses The trend in the semi fixed expenses is the total semi fixed expenses increases over a few months followed by a decline in the total expenses in on month. As seen in the 1st month where the total expenses increased from 2,772 to 100,632 in the 2nd month and to 108,107 in the 3rd month and followed by a decline to 72,584 during the fourth month and then an upward trend in
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5th and 6th months. The unusual trend appears months 27 and 29 where there appear two consecutive declines in the 27th month as well as the 28th month. The total semi fixed expenses declined from 157,867 during the 26th month to 147,895 during the 27th month and to 139,950 during the 28th month and then the two consecutive increases in the following months, (Cataldo II,). The same unusual pattern appears again between the 48th and the 49th month where the total expenses declined in the two years. Semi-Fixed (S-F) Expenses: 1984
1985
1986
1987
1988
613006
968789
1211464
1289758
1360489
600
26705
19468
19058
18268
210226
288347
281219
309608
371314
31473
46141
75468
65935
81252
Freight
5719
5987
6528
5731
4663
Vehicle
22913
23718
23664
20370
19483
Demonstrators
10465
4969
-1513
4192
707
Floor-Planning
278531
301113
276201
156129
305044
1172933
1665769
1892499
1870781
2161220
Salaries Vacation Advertising Supplies/Tools/Laundry
Total SF Expense
Taking the salaries and the vacation, the two assumes an upward trend between 1984 and 1985. Salaries continued with the upward trend while vacation declined in the years 1985 to 1988. On the other hand, supplies and advertising have an upward trend as from 1984 to 1988 but for the supplies there was a decline in the year1987 then it resumed to the increase. The floor planning has an upward trend in the first two years followed by a two year decline and then an increase in
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the year 1988. The floor planning increased from 287,531 in the year 1984 to 305,044 during the year 1988. Increase in the total net revenue caused the upward trend in supplies and the floor planning. Step 3; low and high measure Semi fixed expenses
High
NVR Salaries
280
31
128,007
46,114
9,212
160
Vacation Advertising Supplies/Tools/Laundry
Low
38,616
9112
14,426
(684)
Freight
1628
(492)
Vehicle
2880
486
Demonstrators
4517
(3513)
Floor-Planning
188040
(78173)
352, 182
2772
Total
It may not be possible to link the NVR lows and highs with those of the other variables to determine the variable and fixed elements of the NVR. This is because the low point of the NVR is 31 and the high value of the same is 280 while those of the salaries are 128,007 and 46114 for the high and low respectively. Taking the total expenses of the semi fixed variable would probably be more appropriate to use.
MO TOM ART
5 NVR
SF
High
4298748
2161220
Low
2885969
1172933
Difference
1412779
988287
With the value of the yearly basis it is easier to evaluate and get the difference between the low and high of the semi fixed expenses and the NVR. High the low and the high measures do not match the two gives inaccurate data of the fixed and variable expenses, (Cataldo II,). Low and high expenses provides values for the company that can be used to estimate the fixed and the variable costs of the total semi fixed expenses b ut not the real data as it only compares the two extremes. Step 4 FC
VC
R-Sq
1 Salaries
106866
-110
4.1%
2 Vacation
-3022.07
-1
0.0%
21654
-8
0.1%
4 Supplies/tools/laundry
6848.64
-16
4.2%
5 Freight
709.142
1
0.1%
6 Vehicles
1575.81
0
0.0%
7 Demonstrators
23181.6
-128
10.4%
8 Floor planning
105247
-428
15.5%
-692
31.3%
3 Advertising and training
9 Total
263059
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Problems encountered A lot of the data nave the negative sign which seems to be unreal when computing. Again using excel with such a huge data was also a problem. Are R-square high or low Most of the R-squared data are low as some are zero. For demonstrators, floor planning and the total expenses the R-squared can be said to be high. Are slopes negative or positive? Most of the slopes are negative. There are only two slopes that are positive. Consistency with the high-low effort The high-low techniques shows that the fixed costs are negative while the regressive techniques shows that the variable cost are ne gative and therefore my conclusions varies with the high-low effort. Step 5 Summary Throughout the text I have used the variable and the fixed cost in the analyzing of data. In summary therefore I would start by explaining what the meaning of the fixed cost is as well as the variable cost. Fixed cost is used to refer to the costs that are constant. These costs do not change irrespective of the changes in the units of a product produced. On the other hand, variable
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costs refer to the values that vary from time to time, (Cataldo II, ). Variable cost will vary according to the units of a product produced. Using a base is a most crucial factor in the determination of the fixed and the variable costs. For example in this case the semi fixed expenses is determined by the changes in the eight items used such as salaries and vacations. In this example the base that was used is the NRV. The NRV was not the most appropriate even though it has been used and therefore it becomes difficult to determine the values of the fixed and the variable costs irrespective of the method that is used to calculate the fixed and the variable cost. To get the true values of the fixed and variable cost using the various methods other factors could be considered as the base of calculations other than using the NRV. The factors that would have probably given the correct figures for the variable and the constant costs are the number of hours for labor, the number of hours for machines as well as the units of a product produced within a given period of time. The negative value shown by the demonstrators during the year 1986 may build a basis within which motmart may be said to have inaccurate record even though it may not be used as a conclusion that the industry keeps incomplete records unless the issue is further investigated upon.
MO TOM ART
8 References
Cataldo II, A. J., Oehlers, P. F., & Pelfrey, C. S. Senior Capstone: Business. Laidig, D. A. (2010). Designing new performance-based incentive regimes for operating contracts in the Province of Gipuzkoa, Spain (Doctoral dissertation, Massachusetts Institute of Technology). Cataldo II, A. J., & DeJoy, J. S. Motomart: Mixed Up Over Mixed Costs1.
