Engineering Management

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1.The company’s warehouse has been busy taking in and shipping out vendor- supplied automotive parts. Table 6.13 shows the warehouse’s activities in eight consecutive periods, during which time the price of the parts has steadily increased.

TABLE 6.13

FIFO and LIFO Computation

Period Units In Unit Price Paid ($) Units Out

1 150 100 —

2 250 120 —

3 — — 180

4 — — 100

5 100 130 —

6 — — 200

7 100 140 —

8 — — 80

a. Determine the total LIFO prices for each stock withdrawal in periods 3, 4, 6,

and 8.

b. Repeat the same price computation using the FIFO technique.

2. A manufacturing company makes three products, A, B, and C. The fixed FO is $60,000, consisting of $10,000 for material handling, material waste, and procurement; $30,000 for rent and utilities; and $20,000 for safety and canteen costs. Other costs are shown in Table 6.16

a. Determine the product cost for products A, B, and C, using the ABC method.

b. If products A, B, and C are sold at $400, $350, and $150 per unit, respectively, what is the gross profit for each product?

c. What is the company’s total gross profit per month if all units produced are sold?

3. You are considering a good-looking Toyota hybrid car priced at $28,000 or an elegant GM luxury car at $24,000. The fuel efficiency is rated at 50 miles per gallon for the Toyota and 25 miles per gallon for the GM. The annual maintenance cost for both cars is about 0.5% of the car price. The gasoline in the local market is selling at $2.00 per gallon. The cars are to be driven about 10,000 miles per year. You plan to keep your car for five years only. At the end of the fifth year, the resale values of the Toyota and the GM are about 40% and 30%, respectively, of their original prices. The interest rate is 6%.

Which car is the better choice from the standpoint of costs?

4. Company X manufactures automotive door panels that may be made of either sheet metal or plastic sheet molding (glass fiber-reinforced polymer). Sheet metal bends well to the high-volume stamping process and has a low material cost. Plastic sheet molding meets the required strength and corrosion resistance and has a lower weight. The plastic-forming process involves a chemical reaction and has a slower cycle time. Table 6.18 summarizes the cost components for each. Assuming that the machinery and tooling have no salvage value at the end of their respective equipment lives, what is the annual production volume that would make the plastic panel more economical?


Garpah for EM2 Notes
	Wye	Self-Leveling
0	606.48	1543.2
5	3256.48	3909.7
10	5906.48	6276.2
15	8556.48	8642.7
20	11206.48	11009.202
Supply and Demand
	Supply	Demand A	Demand B
10	1.8	7.8	9.5
15	3.1	5.6	7.3
20	4.5	4	5.7
25	6	2.8	4.5
30	8	2	3.7
35			3
0	US Treasury Bills	6.5
5	Bank CD	8
10	Industrial Bonds	10
15	Junk Bonds	25
	TEXAS INSTRUMENTS FINANCIAL STATEMENTS											TEXAS INSTRUMENTS COMPNAY INFORMAITON AND INDUSTRY DATA
		Balance Sheets											1959		1958
		December 31, 1958 and 1959									(Depreciation & amortizatioin:		$8,135		$4,924	)
		(thousands of dollars)									(Preferred diidens	dividends	102		0	)
											(Other dividends		185		0	)
				1959		1958
															PAST RATIOS
Cash				$17,856		$10,841							Fil in 1959	1958	1957	1956	1955	1954	1953
Receivables (net)				29,053		19,350				Current ratio				2	2	2.2	2.5	2	1.9
Inventories				23,282		6,869				Acid test				1.6	1.2	1.3	1.7	1.3	1
Prepaid expenses				664		315				Total debt to total assets				52.30%	47.90%	41.20%	30.40%	46.00%	53.30%
Payments received on govt. contracts				-6,013		-405				Long-term debt as % of capitalization				26.50%	26.30%	16.80%	8.40%	8.30%	25.40%
				---------------		---------------				Total debt to net worth				1.1	0.9	0.7	0.4	0.8	1.1
	Total current assets			$64,842		$36,970				Days' receivables (days)				75.7	66.3	82.2	96.7	81.9	65.5
										Ending inventory turnover (sales)				13.4	7.8	7	7.6	8.1	5.7
Property, plant & equiment				$60,806		$26,773				Ending inventory turnover (cost of sales)				8.8	5.5	5.1	5.5	5.7	4.1
Accumulated depreciatoin				20,083		10,281				Net property trunover				5.6	4.4	4.8	4	5.6	6.9
				--------------		---------------				Total assets turnover				1.7	1.8	1.7	1.5	1.6	1.8
Net property account				$40,723		17,492				Net profit to total assets				11.20%	10.00%	8.60%	8.10%	7.90%	8.50%
Patents, etc. (net)				0		249				Net profit to net worth				23.40%	19.20%	14.60%	11.60%	14.70%	18.30%
Other assets				429		80				Net proft to net sales				6.50%	5.60%	5.10%	5.50%	4.90%	4.70%
				-------------		---------------				Gross profit				34.00%	29.50%	26.50%	27.40%	29,3%	29.20%
	Total assets			$105,994		$53,791
												INDUSTRY INFORMATION
Accrued wages, pensions, taxes, etc.				21,309		10,696				Current ratio				2.3	2	2.1	2.1	2.2	1.6
Other current liabilities				5,589		2,867				Acid test				1.2	1	1	1	1.1	0.6
				---------------		---------------				Total debt to total assets				40.00%	52.80%	46.10%	47.20%	42.60%	56.10%
	Total Currnet liabilities			$37,266		$18,900				Long-term debt as % of capitalization				12.30%	16.70%	17.10%	14.40%	11.30%	7.80%
										Total debt to net worth				0.7	1.1	0.8	1.1	0.7	1.3
Long-term debt				12,000		9,250				Days' receivables (days)				44	45	42	42	39	33
Preferred stock				3,265		0				Ending inventory turnover (sales)				6.2	5.3	4.8	5.5	5.4	4.7
Common stock				3,915		3,257				Ending inventory turnover (cost of sales)				4.8	4.1	3.8	4.2	4.4	3.8
Paid in surplus				8,205		6,228				Net property trunover				8.7	10.1	7.1	8.4	9	12.2
Retained earnings				41,343		16,156				Total assets turnover				2	1.9	1.7	1.9	2	2.2
				---------------		---------------				Net profit to total assets				6.1	5.2	4.8	5.6	4.4	5
	Total liabilities & net worth			$105,994		$53,791				Net profit to net worth				10.20%	11.00%	9.00%	10.60%	7.70%	11.40%
										Net proft to net sales				3.10%	2.70%	2.80%	2.90%	2.30%	2.30%
										Gross profit				22.80%	21.70%	20.60%	23.20%	18.60%	19.90%
		Operating Statements									Number of companies Reported:			60	42	55	65	73	60
		Years 1958 and 1959
		(thousands of dollars)								NOTE:	Averages of compnaies of all sizes up t tpta assets of $10 million. 1953-56 compnaies manufacturing radios,
											phonographs and electronic equipment, 1957-1958companies making electonic components and accessories.
				1959		1958					The number of companies averaged each year is shown as the last item in each column.
Net Sales				$193,213		$91,954				Source:	Derived or adapted from Robert Morris Associates, Statement Studies, 1953 through 1958.
Cost of goods & services				128,434		60,776
				-----------------		---------------
Gross profit				64,779		31,178
Selling, general & admin. Expenses				26,369		13,844
Employee profit sharing & retirement				9,831		4,167
				------------------		---------------
	Total Overhead			36,200		18,011
Operating profit before interest & tax				28,579		13,167
Other income				956		273
				------------------		---------------
	Total IBIT			29,535		13,440
Interest paid				680		505
	Taxable income			28,855		12,935
Income tax				14,712		6,934
				------------------		---------------
Net income				14,143		6,001
	Debt	Valuation	Vu
	0	5	5
	20	10	5
	35	13	5
	50	13.9	5
	60	13	5
	70	10	5
	80	5	5
	Product Life Cycle
		Sales	Profit
	0	0	0
	10	0	-10
	20	5	0
	30	15	5
	40	27	15
	50	38	18
	60	41	12
	70	38	6
	80	28	3
	90	16	0
	100	0	-3
					PUSH		PULL
		Communication			Personal Selling		Mass Advertising
		Price			High		Low
		Product's Need of Special Service			High		Low
		Distribution			Selective		Broad
	One of 60 Curve
	x	F
	0	60
	1	40
	2	26
	3	17
	4	12
	5	9
	6	7
	7	5
	8	3
	9	2
	10	1
	85% Experience Curve
	Production Quantity	Production Cost
	1	1
	2	0.85
	4	0.7225
	8	0.614125
	16	0.522006
	32	0.4437
	36	0.377145
	72	0.32057
	Price-Quality Correlation
		Quantity		Price	QuantityT	QuantityA
	50	100		5	50	280
	40	120		10	100	230
	30	150		20	140	190
	20	150		30	150	150
	10	100		40	120	120
	5	50		50	90	90
	Suppy A	Demand	Supply B
10	1.8	7.8	0.5
15	3.1	5.6	1.8
20	4.5	4	3.1
25	6	2.8	4.6
30	8	2	6.5
35			8.5
	Product	F1	F2	F3	F4	F4	F6
	P1
	P1
	P3
	P4
	Your Product
	P5
	P6
	P7
	Name	Industry	Partners	Activities
	MyAircraft.com	Aerospace	United Technologies	buy and sell parts, manage
			Honeywell	supply and inventory, access
			I2Technologies	tech experts
	Paperexchange.com	Paper	International Paper	Buyers and sellers negotiate
				prices and transact business
				online
	XSAg.com	Agriculture	Various agriculture	Provide auction service online
			companies	for chemicals and seeds
	ChemConnect	Chemical	Dow Chemical	Buy and sell plastics and
			Eastern Chemical	chemical
			Rohm & Haas
	E-Steel	Steel	U.S. Steel	Buy and sell steel products,
			Worthington Industries	search industrial information
	Aug-96	500
	Dec-96	650
	Mar-97	800
	Jun-97	1200
	Sep-97	1500
	Jan-98	1800
	Apr-98	2150
	Jul-98	2500
	Dec-98	3000
	Name	Nature of Site
	Amazon.com	Product sales
	Previewtravel.com	Services
	Mytimes.com	Informantion
	Ebay.com	Customer value
	epinion.com	Custoemr empowerment
	Thirdvoice.com	Commentary
	Blackboard.com	Education
	emusic.com	Distribution
	Macys.com	Mixing online and offine stores
	Respond.com	Reverse auctions
	mercata.com	Viral marketing
	Beenz.com	Web currency
	mysimon.com	Companion shopping
		B2C
	1998	10
	1999	20
	2000	40
	2001	60
	2002	100
	2003	190
	2004	284
		B	C
	B	B2B	B2C
		GM/Ford	Amazon
		EDI Networks	Dell
	C	C2B	C2C
		Priceline	Ebay
		Accompnay	QXC
		Work Users	Home Users
	Yahoo	49.70%	41.50%
	MSN	34.1	27.1
	Netscape	37.7	24.9
	Excite	24.1	21.3
	Lycos	24.1	18.3
	Infoseek	23.8	15.8
	Alta Vista	22.7	15.6
	Snap	13	8.3
	Hotbot	9.6	7.9
	Growth of Web Sites
	1993	50
	1994	75
	1995	100
	1996	200
	1997	1,100
	1998	4,800
	1999	8,500
	Dimension	Customer Relationship Management
	Advertising	Provide infomation in response to specific customer inquiries
	Targeting	Identifying and responding to specific customer behaviors and preferences
	Promotions and	Individually tailored to custopmer
	Offering Discounts
	Distribution Channels	Direct or through intermediaries; customer's choice
	Pricing of products/	Negotaited with each customer
	Services
	New Product Features	Created in respponse to customer demands
	Measurements Used to	Customer intention; total value of the individual customer relationship
	Manage the Customer
	Relationship
	IH	8.392
	Deere	4.933
	Cataerpillar	7.612
	PACCAR	1.882
	IH	85.931
	Deere	75.439
	Caterpillar	88.253
	PACCAR	140.156
	IH	4.4
	Deere	6.3
	Caterpillar	6.5
	PACCAR	6.4
	IH	1.60
	Deere	1.18
	Caterpillar	1.40
	PACCAR	2.54
		Sales ($B)	Net Income ($B)	Gross Margin (%)
	1977	5.975	0.203	17.95
	1978	6.664	0.187	18.57
	1879	8.392	0.3696	18.06
		Sales ($B)	Gross Margin (%)
	1977	5.975	17.95
	1978	6.664	18.57
	1979	8.392	18.06
	1977	3.455
	1978	3.52
	1979	3.582
	1977	2.2
	1978	1.8
	1979	1.7
	1977	0.57
	1978	0.52
	1979	0.49
	Trucks	47.3
	Agricultural Equipment	35.5
	Construction Equipment	11.92
	Turbo Machienery	4.24
	United States	72.68
	Canada	8.54
	EU, Africa and Mid-East	13.8
	Latin America	0.66
	Pacific	4.3
		1985	2000
	US	300,000	150,000
	Others	70,000	150,000
	TOTAL	370,000	300,000
	ABC MODEL FOR A SMALL MANUFACTURING COMPANY
	Forging Press Hour Cost	Machine Hour Cost	Induction Heating Cost	Material Movement Cost
Directly	Depreciation	Depreciation	Depreciation	Depreciation
Attributable	Utilities	Utilities	Utilities	Utilities
Costs	Manufacutring Supplies	Manufacutring Supplies	Manufacutring Supplies	Manufacutring Supplies
	Outside Repairs	Outside Repairs	Outside Repairs	Outside Repairs
		Straight-time wages		Straight-time wages
		Fringe Benefits		Fringe Benefits
		Payroll Tases		Payroll Tases
		Overtime Premium		Overtime Premium
		Shift Premium		Equipment Leases
Distributions	Maintenance	Maintenance	Maintenance	Maintenance
	Buildings and Grounds	Buildings and Grounds	Buildings and Grounds	Buildings and Grounds
	Manufacturing Engineering	Manufacturing Engineering	Manufacturing Engineering	Human Resources
	Commodity Overhead	Commodity Overhead	Commodity Overhead	Supervision
		Supervision
Total	Total Costs	Total Costs	Total Costs	Total Costs
Rate	$ Per Press Hour	$ Per Machine Hour	$ Per Heating Hour	$ Per Move
EXAMPLE OF AN INCOME STATEMENT ($Million)
	Year 2000	Year 2001
Sales Revenue (Net)	8,380.30	8,724.70
Cost of Goods Sold	6,181.20	6,728.80
Gross Margin	2,199.10	1,995.90
General, Selling and AdminIstrative Expenses	320.70	318.80
Pensions, Benefits, R&D, Insurance and Others	494.60	538.70
State, Local and Miscellenous Taxes	180.10	197.10
Depreciation	297.20	308.60
EBIT (Earnings Before Interest and Tax)	906.50	632.70
Interest and Other Costs Related to Debts	82.90	114.40
Taxable Income	823.60	518.30
Corporate Tax	(32.05%) 264.00	(20.84%) 108.00
Net Income (NOPAT)	559.60	410.30
Common Stock Dividend	151.60	172.80
Retained Earnings	408.00	237.50
EXAMPLE OF A BALANCE SHEET ($Million)
	Year 2000	Year 2001
ASSETS
Cash	231.00	245.70
Marketable Securities	450.80	314.90
Accounts Receivable	807.10	843.50
Inventories	1,170.70	1,387.10
Total Current Assets	2,659.60	2,791.20
Fixed Assets	11,070.40	11,897.70
Accumulated Depreciation	6,410.70	6,618.50
Net Fixed Assets	4,659.70	5,279.20
Long-term Receivaables and Other Investments	574.80	735.20
Prepaid Expenses	260.90	362.30
Total Long-term Assets	5,495.40	6,376.70
TOTAL ASSETS	8,155.00	9,167.90
LIABILITIES
Notes Payable	65.30	144.50
Accounts Payable	571.20	622.80
Accrued Taxes	346.30	275.00
Payroll and Benefits Payable	433.70	544.30
Long-term Debt Due Within a Year	30.40	50.80
Total Current Liabilities	1,446.90	1,637.40
Long-term Debt	1,542.50	1,959.90
Deferred Tax on Income	288.40	405.30
Deferre Credits	27.00	36.30
Total Long-term Liabilities	1,857.90	2,401.50
TOTAL LIABILITIES	3,304.80	4,038.90
Common Stock ($1.00 Par Value)	81.40	82.20
Capital Surplus	1,549.10	1,589.60
Accumulated Retained Earnings	3,219.70	3,457.20
TOTAL OWNER'S EQUITY	4,850.20	5,129.00
TOTAL LIABILITEIS AND OWNERS' EQUITY	8,155.00	9,167.90
EXAMPLE OF A FUNDS FLOW STATEMENT ($Million)
		2000-2001	%
SOURCES
Net Income		410.30	24.11%
Depreciation*		308.60	18.14%
Decrease in Marketable Securities		135.90	7.99%
Increase in Notes Payable		79.20	4.66%
Increase in Accouns Payable		51.60	3.03%
Increase in Payroll and Benefits		110.60	6.50%
Increase in Deferred Tax on Income		116.90	6.87%
Increase in Long-term Debt		437.80	25.73%
Increase in Common Stock and Capital		41.30	2.43%
Increase in Deferred Credit		9.30	0.55%
TOTAL SOURCE OF FUNDS		1,701.50	100%
USES
Increase in Plants and Equipment		928.10	54.55%
Dividend Paid		172.80	10.16%
Increase in Cash		14.70	0.86%
Increase in Accounts Receivable		36.40	2.14%
Increae in Inventories		216.40	12.72%
Increase in Long-term Receivables and Other Investments		160.40	9.42%
Increase in Accured Taxes		71.30	4.19%
Increase in Prepaid Expenses		101.40	5.96%
TOTAL USES OF FUNDS		1,701.50	100%
* Depreciation is a non-cash expenditure, which must be added back here to
represent a source of funds avialable to the firm
TYPICAL VALUES IN SELECTED INDUSTRIES
		MANUFACTURING FIRMS
	General Machienery	Electric Apparatus	Computer	Iron & Steel
PERFORMANCE RATIOS
1. Current Ratios (-)	2.62	2.59	2.31	2.39
2. Net Income to Net Sales (%)	5.16	3.68	3.7	6.16
3. Net Income to Tangible Net Worth (%)	13.63	9.59	9.54	16.11
4. Collection Perioid (Days)	48	57	78	43
5. Fixed Asset to Tangible Net Worth (%)	39.1	41.6	31.4	56.4
6. Totoal Debt to Tangible Net Worth (%)	86.3	101.5	126.1	80.9
Reference: "Notes on Financial Analysis," Harvard Business Case # 206-047 (1960).
Problem 3-1
ABC Company Income Statement ($1000)
	Year 2001	Year 2000
Sales	330,000	395,000
Cost of Sales*	265,000	280,000
Gross Profit	65,000	115,000
Selling and Administrative Expenses	95,000	88,000
Other Expenses	4,000	35,000
Interest	2,000	3,000
Total Expenses	101,000	94,500
Profit (Loss) Before Taxes	(36,000)	20,500
Federal Income Tax	0	10,000
Net Profit (Loss)**	(36,000)	10,500
*Includes depreciation of $15,500,000 in 2000 and $15,000,000 in 2001.
**No dividents were paid in 2001
ABC Company Balance Sheet
	Year 2001	Year 2000
Current Assets
Cash	18,500	17,000
Marketable Securities	0	5,000
Accounts Receivables	39,500	28,500
Inventories	98,000	113,000
Total Current Assets	156,000	163,000
Plant and Equipment (net)	275,000	290,000
Other Assets	3,000	8,000
Total Assets	434,000	461,500
Current Liabilities
Accounts Payable	34,500	18,000
Note Payable	20,000	25,000
Acrued Expenses	18,500	11,500
Total Current Liabilities	73,000	54,500
Morgate Payable	20,000	30,000
Common Stock	200,000	200,000
Earned Surplus	141,000	177,000
Total Liabilities and Net Worth	434,000	461,500
		Debit	Credit		Debit	Credit		Debit	Credit
		(1)	(2)		(3)	(4)		(5)	(6)
		Explanations:
		(1) Purchasing raw materials
		(2) Putting materials into production processs
		(3) Production is initiated, adding value to raw materials.
SOURCES OF FUNDS		(4) Production is complete
	Year 2000-2001	(5) Receiving of finished goods in storage
		(6) Finished goods are shipped for sale
Decrease - Marketable Securities	5,000
Decrease - Inventories	15,000
Decrease - Other Assets	5,000
Increase - Accounts Payable	16,500
Increase - Accured Expenses	7,000
Decrease - Plant and Equipment	15,000
TOTAL SOURCES OF FUNDS	63,500
USES OF FUNDS
Increase - Cash	1,500
Increase - Accounts Receivable	11,000
Decrease - Notes Payable	5,000
Decrease - Mortage Payable	10,000
Net Loss for Period	36,000
TOTAL USES OF FUNDS	63,500
PERFORMANCE RATIOS FOR TEXAS INSTRUMENTS (1959)
Current Ratio	1.7
Acid Test	1.1
Total Debt to Total Assets	46.50%
Long-Term Debt as Percent of Capitalization	17.50%
Total Debt to Net Worth	0.9
DaysRreceivables	54.1 Days
Ending Inventory Turnover (Sales)	8.3x
Ending Inventory Tunove (Cost of Sales)	5.5x
Total Assets Turnover	1.8x
Net Property Turnover	4.7x
Net Profit to Total Assets	13.30%
Net Profit to Net Sales	7.30%
Gross Profit (Margin)	33.50%
	INDUSTRIAL VRSUS CONSUMER PRODUCTS
1. Number of Buyers	Few	Many
2. Target Endusers	Employers	Self
3. Nature of Products	Tailor-made, Technical	Commodity, Non-techncial
4. Buyer Sophistication	High	Low
5. Buying Factors	Techncial, Quality, Price,	Price, Convenience,
	Delivery, Service	Packaging, Brand
6. Consumption	OEM Parts for Resell,	Direct consumption
	Own Consumption
7. Producer Enduser Contact	Low	High
8. Time Lag Between Demand and Supply	Large	Small
9. Segmentation Techniques	SIC (Standard Industrial	Demographic, Life Style,
	Classification), Size,	Geogrpahy, Ethnic, Religious,
	Geography, Enduser,	Neighborhood, Behavior
	Decisioin Level
10. Classification of Goods	Raw Materials, Fabricated	Conveniece (Household Supplies,
	Parts, Capital Goods,	Foods), Shopping (Cameras,
	Accessory Equipment,	Refrigeratros), Specailty (Foods,
	OMR Supplies, Badged	Brand Name Clothing)
	Products
		Debit	Credit		Debit	Credit		Debit	Credit
		Beg. 75	3 (b)		Beg. 22	440 (f)		Beg. 50
		198 (a)	187 (c)		125 (d)			440 (f)	430 (g)
					147 (e)
					187 (c)
		End. 83 (h)			End. 41 (h)			End. 60 (h)
		Explanations:
		(a) Purchasing raw materials by paying $198.00
		(b) Receiving credit for having returned some materials purchased
		(c) Direct materials actually shipped to WIP and used in the accounting period.
		(d) Direct labor used and cost assigned.
		(e) Factory overhead used and cost assigned.
		(f) Product completed and transferred out to warehouse.
		(g) Finished goods shipped out to customer, receiving CGS as credit.
		(h) The sum of ending balances in Stores, WIP and FG represents Inventory
		at the end of the accounting period.
ABC Model for a Service Department
TRADITIONAL		ABC
Salaries	$621,400	Key/Scan Claims	$32,000
Equipment	161,200	Analyze Claims	121,000
Travel Expenses	58,000	Suspend Claims	32,500
Supplies	43,900	Receive Provider Inquires	101,500
Use and Occupancy	30,000	Resolve Member Problems	83,400
		Process Batches	45,000
Total	$914,500	Determine Eligibility	119,000
		Make Copies	145,000
		Writre Correspondence	77,100
		attending Training	158,000
		Total	$914,500
IMPACT OF INVENTORY ACCOUNTING ON CGS
(Company has 5, buys 10, and uses 10 units)
	FIFO	LIFO	Average
Beginning Inventory
5 * $100	500	500	500
Purchases and Value Added
5 * $200	1,000	1,000	1,000
5 * $300	1,500	1,500	1,500
Ending Inventory
5 * .......	1,500	500	1,000
Cost of Goods Sold (CGS)	1,500	2,500	2,000
Problem 3-3
Transaction	Current Ratio	Working Capital
(1)	335/140 = 2.39, down y 0.11	unchanged
(2)	unchanged	unchanged
(3)	310/115 = 2.70, up by 0.2	unchanged
(4)	315/130 = 2.42, down by 0.8	$185,000, down by $10,000
(5)	335/130=2.58, up by 0.08	$205,000, up by $10,000
(6)	315/130 = 2.42, down by 0.8	$185,000, down by $10,000
(7)	335/145=2.31, down by 0.19	$190,000, down by $5,000
(8)	318/130 = 2.45, down by 0.5	$188,000, dowm by $7,000
(9)	310/127 = 2/44, down by 0.6	$183,000, down by $12,000
(10)	341.667/130=2.62, up by 0.12	$211,5667, up by $16,667
Texas Instruments Income Statement (Thousands of dollars)
		1959	1958
Net sales		$193,213	$91,954
Cost of goods & services		128,434	60,776
		-----------------	--------------
Gross profit		64,779	31,178
Selling, general & admin. Expenses		26,369	13,844
Employee profit sharing & retirement		9,831	4,167
		------------------	--------------
	Total Overhead	36,200	18,011
Operating profit before interest & tax		28,579	13,167
Other income		956	273
		------------------	--------------
	EBIT	29,535	13,440
Interest paid		680	505
	Taxable income	28,855	12,935
Income tax		14,712	6,934
		------------------	--------------
Net income		14,143	6,001
TEXAS INSTRUMENTS BALANCE SHEET (THOUSANDS OF DOLLARS)
	1959	1958
Cash	$17,856	$10,841
Receivables (net)	29,053	19,350
Inventories	23,282	6,869
Prepaid expenses	664	315
Payments received on govt. contracts	-6,013	-405
	--------------	--------------
Total Current Assets	$64,842	$36,970
Property, plant & equipment	$60,806	$26,773
Accumulated depreciation	20,083	10,281
	--------------	--------------
Net property account	$40,723	17,492
Patents, etc. (net)	0	249
Other assets	429	80
	-------------	--------------
Total Assets	$105,994	$53,791
Accounts payable	$10,368	$5,337
Accrued wages, pensions, taxes, etc.	$21,309	$10,696
Other current liabilities	$5,589	$2,867
	--------------	--------------
Total Current Liabilities	$37,266	$18,900
Long-term debt	$29,935	$9,250
Total Lliabilities	$67,201	$28,150
Preferred stock	$3,265	$0
Common stock	$3,915	$3,257
Paid in surplus (capital surplus)	8,205	6,228
Retained earnings	23,408	16,156
	--------------	--------------
Total Liabilities & Net Worth	$105,994	$53,791
TEXAS INSTRUMENTS COMPANY INFORMAITON AND INDUSTRY DATA
	$1,959	$1,958
(Depreciation & amortization:	$8,135	$4,924	)
(Preferred dividends	102	0	)
(Other dividends	185	0	)
		PAST RATIOS
	Fill in 1959	1958	1957	1956	1955	1954	1953
Current ratio		2	2	2.2	2.5	2	1.9
Acid test		1.6	$1	1.3	1.7	1.3	1
Total debt to total assets		52.30%	47.90%	41.20%	30.40%	46.00%	53.30%
Long-term debt as % of capitalization		26.50%	26.30%	16.80%	8.40%	8.30%	25.40%
Total debt to net worth		1.1	0.9	0.7	0.4	0.8	1.1
Days' receivables (days)		75.7	66.3	82.2	96.7	81.9	65.5
Ending inventory turnover (sales)		13.4	7.8	7	7.6	8.1	5.7
Ending inventory turnover (cost of sales)		8.8	5.5	5.1	5.5	5.7	4.1
Net property turnover		5.6	4.4	4.8	4	5.6	6.9
Total assets turnover		1.7	1.8	1.7	1.5	1.6	1.8
Net profit to total assets		11.20%	10.00%	8.60%	8.10%	7.90%	8.50%
Net profit to net worth		23.40%	19.20%	14.60%	11.60%	14.70%	18.30%
Net profit to net sales		6.50%	5.60%	5.10%	5.50%	4.90%	4.70%
Gross profit		34.00%	29.50%	26.50%	27.40%	29,3%	29.20%
		INDUSTRY INFORMATION
Current ratio		2.3	2	2.1	2.1	2.2	1.6
Acid test		1.2	1	1	1	1.1	0.6
Total debt to total assets		40.00%	52.80%	46.10%	47.20%	42.60%	56.10%
Long-term debt as % of capitalization		12.30%	16.70%	17.10%	14.40%	11.30%	7.80%
Total debt to net worth		0.7	1.1	0.8	1.1	0.7	1.3
Days' receivables (days)		44	45	42	42	39	33
Ending inventory turnover (sales)		6.2	5.3	4.8	5.5	5.4	4.7
Ending inventory turnover (cost of sales)		4.8	4.1	3.8	4.2	4.4	3.8
Net property turnover		8.7	10.1	7.1	8.4	9	12.2
Total assets turnover		2	1.9	1.7	1.9	2	2.2
Net profit to total assets		6.1	5.2	4.8	5.6	4.4	5
Net profit to net worth		10.20%	11.00%	9.00%	10.60%	7.70%	11.40%
Net profit to net sales		3.10%	2.70%	2.80%	2.90%	2.30%	2.30%
Gross profit		22.80%	21.70%	20.60%	23.20%	18.60%	19.90%
Number of companies Reported		60	42	55	65	73	60
NOTE:	Averages of companies of all sizes up to total assets of $10 million. 1953-56 companies manufacturing
	Radios, phonographs and electronic equipment, 1957-1958companies making electronic components
	and accessories. The number of companies averaged each year is shown as the last item in each column.
Source:	Derived or adapted from Robert Morris Associates, Statement Studies, 1953 through 1958.
	Product A	Product B	Product C
Number of Units Produced Per Month (-)	250	400	900
Total Material Costs Per Month ($)	5000	8000	4000
Labor Hours Per Unit (hr)	4	3.5	1.5
Labor Rate Per Unit ($/hr)	25	20	30
Machine Hour Per Unit (hr)	1	1	3


	Year	%
	65	1
	66	1.5
	67	4
	68	3
	69	4
	70	6
	71	5
	72	3.9
	73	4
	74	10
	75	12
	76	7
	77	5
	78	6.5
	79	8
	80	14
	81	12.5
	82	10.5
	83	4
	84	4
	85	3.95
	86	3.9
	87	2.2
	88	4
	89	4.5
	90	5
	91	6
	92	3
	93	3
	94	2.9
	95	3
	96	3.2
	97	3
	98	3.2
	99	2.9
	0	2
	1	1
Problem 2-5
	YEAR	SL	SOYD	DELTA	F = ( 1 - t ) DELTA	PRESENT WORTH
	1	13333.3333333333	(6/21)80000 = 22857	9523.81	4761.91	4329
	2	13333.3333333333	(5/21)80000 = 19048	5714.3	2857.15	2361.28
	3	13333.3333333333	(4/21)80000 =15238	1904.8	952.4	715.54
	4	13333.3333333333	(3/21)80000 = 11428.6	-1904.8	-952.4	-650.5
	5	13333.3333333333	(2/21)80000 = 7619.05	-5714.28	-2857.14	-1774.06
	6	13333.3333333333	(1/21)80000 = 3809.52	-9523.8	-4761.9	-2687.95
				TOTAL		$2,293.31
Problem 2-6
	YEAR	MAINTENANCE	TRADE-IN	ACCUMULATED	TOTAL ACCUMULATED	AVERAGE ANNUAL COST OF
		COST	VALUE	DEPRECIATON	EXPENSES	OWNERSHIP & MAINTENANCE
	1	1,000	24,000	16,000	17,000	17,000
	2	2,000	21,000	19,000	22,000	11,000
	3	3,000	18,000	22,000	28,000	9,333
	4	4,000	15,000	25,000	35,000	8,750
	5	5,000	12,000	28,000	43,000	8,600
	6	6,000	9,000	31,000	52,000	8,667
Problem 2-7			A	B	C
		Cost ($)	1,200	1,200	1,200
		Weeks in Operation	10	10	13
		Hours in Operation	1,680	1,680	2,184
		% of useful life	70%	70%	91%
		Depreciation Charge ($)	840	840	1,092
		TOTAL	$2,772
			(Zero Salvage Value Assumed)
Problem 2-8		TYPE	CONVENTIONAL	AIR-SUPPORTED
		First Cost ($)	200,000	35,000
		Life (years)	40	8
		Annual Maintenance ($)	1,500	5,000
		Power & Fuels ($)	700	5,500
		Annual Taxes *$)	1.5/100	1.5/100
		Salvage Value ($)	40,000	3,000
		Interest Rate (-)	0.08	0.08
Problem 2-9			WYE	SELF-LEVELING
		First Cost	5,500	7,000
		Maintenance	250	500
		Labor Cost	200+150+100+80=	200+150_200+160 =
			530/mile	710/1/.5 miles =473.3/miles
		N	20	10
Problem 2-10			Steam	Electric
		First Cost ($)	$2,600,000	$2,800,000
		Life (years)	25	30
		Present Age (years)	18	30
		Remaining Life (years)	7	30
		Present Salvage Value ($)	800,000	0
		Final Salvage Value	130,000	290,000
		Annual Expenses	425,000	312,500
Problem 2-11		Project	0	1	2
		A	-10	30	10
		B	-5	5	20
		C	-5	5	15
Prolem 2-12			A	B
		Investment	$500,000	$300,000
		Profit year 1	150,000	50,000
		Profit Year 2	200,000	150,000
		Profit Year 3	250,000	200,000
		Profit Year 4	150,000	300,000
		Profit year 5	100,000	200,000
Problem 2-13		Design	Cost	Maximum Storage Capacity
		A	$500,000	1 Unit
		B	625,000	1.5 Units
		C	900,000	2.0 Units
		Units Annual Rainfall	Probability
		0	0.10
		0.1 to 0.5	0.60
		0.6 to 1.0	0.15
		1.1 to 1.5	0.10
		1.6 to 2.0	0.04
		2.0 or More	0.01
		Traditional Analyses	Risk Simulation
		Single-valued	x1% probablity that a given outcome
		outcome (cost,	(cost, time to completion) will not
		Time to completion)	exceed x2.
			Minimum Outcome (x3)
			Most Likely Outcome (x4)
			Maximum Outcome (x5)
			Standard Deviation as a overall
			measure of project risk (x6)

FOREIGN INVESTMENT UB HINA (YEAR-TOYEAR % CHANGE)
3/22/99
WSJ - 12/16/98
	%
1	7
2	-5
3	22
4	-1
5	-12
6	-1
7	-4
8	1
9	5
10	12
11	17

China Trade Statistics
3/22/99
	US Exports	US Imports
72	0.1	0
73	0.7	0.1
74	0.8	0.1
75	0.3	0.2
76	0.1	0.2
77	0.2	0.2
78	0.8	0.3
79	1.7	0.6
80	3.8	1.1
81	3.6	1.9
82	2.9	2.3
83	2.2	2.2
84	3	3.1
85	3.9	3.9
86	3.1	4.8
87	3.5	6.3
88	5	8.5
89	5.8	12
90	4.8	15.2
91	6.2	19
92	7.5	25.7
93	8.8	31.5
94	9.3	38.8
95	11.7	45.6
96	12	51.5
97	12.8	62.5
98	14	71
99	15	80
	US Exports	US Imports
83	2.2	2.2
84	3	3.1
85	3.9	3.9
86	3.1	4.8
87	3.5	6.3
88	5	8.5
89	5.8	12
90	4.8	15.2
91	6.2	19
92	7.5	25.7
93	8.8	31.5
94	9.3	38.8
95	11.7	45.6
96	12	51.5
97	12.8	62.5
98	14	71
99	15	80
	Wye	Self-Leveling
0	810.187	1543.207
5	3460.187	3909.7
10	6110.187	6276.2
15	8760.187	8642.7
20	11410.187	11009.202
	Wye	Self-Leveling
0	0.81	1.543
5	3.46	3.909
10	6.11	6.276
15	8.76	8.642
20	11.41	11.009
	Inflation
65	1
66	1.3
67	3.8
68	2.8
69	4.1
70	6
71	5
72	3.8
73	3.9
74	10
75	12.05
76	7
77	5
78	6.5
79	8
80	14
81	12.5
82	10.5
83	4
85	4
85	3.9
86	3.8
87	2.5
88	4
89	4.5
90	5
91	6
92	3
93	3
94	2.8
95	3
96	3.2
97	3
98	3.2
99	2.9

HARDWOOD
Chinese Imports(1000 cum)
		1997	1998	1999	2000
Logs		28	110	390	420
Lumber		833	1041	1200	1300
		Annual	1Q	1Q (Logs+Lumber)
	1995	65
	1996	75
	1997	125
	1998	116	28	9.7
	1999		34	15
		Househod Decoration & Repair
		YEAR	$(MM)	$(MM)
		1991	$ 736.00
		1992	$ 982.00
		1993	$ 1,472.00
		1994	$ 2,208.00
		1995	$ 3,681.00
		1996	$ 4,665.00
		1997	$ 6,135.00
		1998		$ 8,300.00
		1999		$ 10,470.00
		2000		$ 12,638.00

Trade Deficit
	Trade Deficit
China (+22.7%)	$4.80
Japan (-28.7%)	$4.66
Canada (+24.2%	$2.71
NICS (179.8%)	$1.58
Euro Zone (-38.6)	$1.55
Mexico (+13.9%)	$1.43
European Union (-65.5%)	$1.12
Newly Industrized countries: Hong Kong, South Korea, Singpore, Taiwan
years to profit
TIME (YEARS)	PROFITABILITY
1 TO 2	62.5
3 TO 5	12.5
5 TO 7	0
8 TO 10	6
OVER 10	19
	POPULATION (MM)
NewRiches	2
Yuppies	60
Salary Men	330
Working Poor	800
	1192
Population	Retail Sales
16.90%	33%
83.10%	67%
Regions	Population	Retail Sales
High Retails Sales	16.90%	33%
Others	83.10%	67%

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