Overtime Premium Is A Direct Cost Or Indirect Cost?

Generally overtime premium, whether it is paid to the direct workers or indirect workers, is supposed to be an indirect cost except if the overtime is worked on a special request of a customer to complete his specific job, then the overtime premium is supposed to be a direct cost to that work only.

Concept Of Capital Maintenance

This concept actually tells that before any payment to the shareholder , the previous or original capital must be maintained, let say an organization have a capital of 500,000 and during the period it earns a profit of 60,000, but the inflation rate is 10%, therefore 50,000 (10% of 500,000) is required to maintain the actual capital and only 10,000 (60,000 – 50,000) is available to distribute among the shareholder.

ECONOMIC ORDER QUANTITY

Actually Economic Order Quantity leads to the question that is which quantity should be ordered in order to minimize the expenses. When a new order is placed certain type or expenses are related to it , like ordering cost & holding cost of inventory.

Economic order quantity applies only when the demand of the product and the ordering cost are constant over the period. Obviously it seems unrealistic :) , anyway, it also held a cost i.e holding cost for each unit.

FORMULA:

 

Q = Economic order quantity

C = cost of ordering

D = Demand during the period

h = Cost of holding one unit of inventory

Let say :

Purchase cost / unit = $ 18

Demand for the year = 50,000 units

Holding cost / unit = $ 5

Cost of placing an order = $ 50

E.O.Q = 1000 units.

This is the quantity that should be placed at one time so that to achieve the minimum related costs.

Minimum & Maximum Level Of Inventory

MINIMUM LEVEL:

This level is supposed to be a dangerous level that means if you reached upto this level or this level is left in your hand a new order must be placed otherwise you may run out of inventory (stockout).

FORMULA:

Minimum Level = re-order level - ( average usage x average lead time)

Let say:

Maximum usage = 600 per week

Minimum usage = 400 per week

Time required to receive material ( in emergency cases) = 10 days

Time required to receive material ( atmost) = 20 days

Re-order level = 12000 units

 

Minimum level = 12000 - ( 500 x 15 )

Minimum level = 4500 units

 

MAXIMUM LEVEL:

 

This level also supposed to be a warning level for the concerned authirities that inventory level is exceeding the maximum storage limit, that leads to the extra expenses in terms of holding cost or wasteful material.

 

FORMULA:

 

Maximum level = reorder level + re-order quantity - ( minimum usage x minimum lead time)

 

Let say:

Maximum usage = 600 per week

Minimum usage = 400 per week

Time required to receive material ( in emergency cases) = 10 days

Time required to receive material ( atmost) = 20 days

Re-order level = 12000 units

Re-order quantity = 13000 units

 

Maximum level = 12000 + 13000 - ( 400 x 10 )

Maximum level = 21000 units.

Re-order Level OR Ordering Point For Inventory

RE-ORDER LEVEL:

Re-order level is actually the level at which a new order is placed for inventory , It is based on the past experience of usage of that inventory in a given time period and the lead time. Lead time is actually the difference of the time of placing an order & the material available to use.

FORMULA:

Re-order level = Maximum usage x maximum lead time

Let say:

Maximum usage = 600 per week

Minimum usage = 400 per week

Time required to receive material ( in emergency cases) = 10 days

Time required to receive material ( atmost) = 20 days

Reordel level or ordering point = 600 x 20

Reorder level = 12000 units.

That means when u have reached this level , or the inventory left in yours hand = 12000 units , an order to purchase further inventory should be placed.

Variable Cost Per Unit And Total Fixed Cost By High-Low Method.

By High-Low method we can calculate the variable cost per unit & fixed cost for the period.

Let say in 2008 total output was 100,000 units costing $180,000

& in 2009 total output was 80,000 units costing $160,000

Variable cost/unit = (total cost at high activity level – total cost at low activity level) / (total units at high                                                                       activity level – total units at low activity level)

Variable cost/unit = (180000-160000) / (100000-80000)

Variable cost/unit = 1 $ / unit

Similarly,

Fixed cost = (total cost at high activity level) – (total units at high activity level x variable cost/unit)

Fixed cost = (180,000) – (100000 x 1)

Fixed Cost = 80,000

With this method we can also calculate the future expected total cost for the given output,

Let say we expect total output in 2009 = 110000 units

Now Total cost = Fixed cost + Variable cost

Total cost = 80000 + (1 x 110000)

Total cost = 190,000

HIGH-LOW METHOD WITH STEPPED UP FIXED COST:

Guys you know that fixed cost is dependent on activity level, it remains fixed at certain level of activity but when the activity level crosses that limit fixed cost will be changed. Similarly, let say when more than 120,000 units produced a $ 20,000 stepped up fixed cost will be required. Means total fixed cost for 120,000 units of output will be 100,000 (80000+20000).

Now again assume the above question with some variation:

 Let say in 2008 total output was 125,000 units costing $200,000

& in 2009 total output was 80,000 units costing $160,000

Note: Before any calculation just deduct the stepped up fixed cost from the high level activity cost

New high level activity cost = 200,000-20,000 = 180,000

Variable cost/unit = (total cost at high activity level – total cost at low activity level) / (total units at high                                                                       activity level – total units at low activity level)

Variable cost/unit = (180000-160,000) / (125000-80000)

Variable cost/unit = 0.444 $ / unit

Similarly for Fixed cost,

NOTE: here total fixed cost will remain as 200,000

Fixed cost = (total cost at high activity level) – (total units at high activity level x variable cost/unit)

Fixed cost = (200,000) – (125000 x 0.444)

Fixed Cost = 144500

 

How To Convert Numbers Into Words In Excell

 I stucked in one function of excell i.e how to convert numbers into words like 124.5 , i would like to write it as " One Hundred Twenty Four Dollars and Fifty Cents" Now i got the solution... so sharing it with you :)

1) Firstly open an excell sheet , n press (Alt+F11) a blank page will be open  just like the pic shown below

2) Now you can easily find the "insert" option in this page, press " insert" small page will be open giving you an option of " MODULE " just click on " MODULE" another white page will be open just like the pic shown below:

3) in this blank white page just copy and paste the code given below :

Option Explicit
'Main Function
Function SpellNumber(ByVal MyNumber)
    Dim Dollars, Cents, Temp
    Dim DecimalPlace, Count
    ReDim Place(9) As String
    Place(2) = " Thousand "
    Place(3) = " Million "
    Place(4) = " Billion "
    Place(5) = " Trillion "
    ' String representation of amount.
    MyNumber = Trim(Str(MyNumber))
    ' Position of decimal place 0 if none.
    DecimalPlace = InStr(MyNumber, ".")
    ' Convert cents and set MyNumber to dollar amount.
    If DecimalPlace > 0 Then
        Cents = GetTens(Left(Mid(MyNumber, DecimalPlace + 1) & _
                  "00", 2))
        MyNumber = Trim(Left(MyNumber, DecimalPlace - 1))
    End If
    Count = 1
    Do While MyNumber <> ""
        Temp = GetHundreds(Right(MyNumber, 3))
        If Temp <> "" Then Dollars = Temp & Place(Count) & Dollars
        If Len(MyNumber) > 3 Then
            MyNumber = Left(MyNumber, Len(MyNumber) - 3)
        Else
            MyNumber = ""
        End If
        Count = Count + 1
    Loop
    Select Case Dollars
        Case ""
            Dollars = "No Dollars"
        Case "One"
            Dollars = "One Dollar"
         Case Else
            Dollars = Dollars & " Dollars"
    End Select
    Select Case Cents
        Case ""
            Cents = " and No Cents"
        Case "One"
            Cents = " and One Cent"
              Case Else
            Cents = " and " & Cents & " Cents"
    End Select
    SpellNumber = Dollars & Cents
End Function
     
' Converts a number from 100-999 into text
Function GetHundreds(ByVal MyNumber)
    Dim Result As String
    If Val(MyNumber) = 0 Then Exit Function
    MyNumber = Right("000" & MyNumber, 3)
    ' Convert the hundreds place.
    If Mid(MyNumber, 1, 1) <> "0" Then
        Result = GetDigit(Mid(MyNumber, 1, 1)) & " Hundred "
    End If
    ' Convert the tens and ones place.
    If Mid(MyNumber, 2, 1) <> "0" Then
        Result = Result & GetTens(Mid(MyNumber, 2))
    Else
        Result = Result & GetDigit(Mid(MyNumber, 3))
    End If
    GetHundreds = Result
End Function
     
' Converts a number from 10 to 99 into text.
Function GetTens(TensText)
    Dim Result As String
    Result = ""           ' Null out the temporary function value.
    If Val(Left(TensText, 1)) = 1 Then   ' If value between 10-19...
        Select Case Val(TensText)
            Case 10: Result = "Ten"
            Case 11: Result = "Eleven"
            Case 12: Result = "Twelve"
            Case 13: Result = "Thirteen"
            Case 14: Result = "Fourteen"
            Case 15: Result = "Fifteen"
            Case 16: Result = "Sixteen"
            Case 17: Result = "Seventeen"
            Case 18: Result = "Eighteen"
            Case 19: Result = "Nineteen"
            Case Else
        End Select
    Else                                 ' If value between 20-99...
        Select Case Val(Left(TensText, 1))
            Case 2: Result = "Twenty "
            Case 3: Result = "Thirty "
            Case 4: Result = "Forty "
            Case 5: Result = "Fifty "
            Case 6: Result = "Sixty "
            Case 7: Result = "Seventy "
            Case 8: Result = "Eighty "
            Case 9: Result = "Ninety "
            Case Else
        End Select
        Result = Result & GetDigit _
            (Right(TensText, 1))  ' Retrieve ones place.
    End If
    GetTens = Result
End Function
    
' Converts a number from 1 to 9 into text.
Function GetDigit(Digit)
    Select Case Val(Digit)
        Case 1: GetDigit = "One"
        Case 2: GetDigit = "Two"
        Case 3: GetDigit = "Three"
        Case 4: GetDigit = "Four"
        Case 5: GetDigit = "Five"
        Case 6: GetDigit = "Six"
        Case 7: GetDigit = "Seven"
        Case 8: GetDigit = "Eight"
        Case 9: GetDigit = "Nine"
        Case Else: GetDigit = ""
    End Select
End Function

4) Now finally press ( Alt+Q) to save the above code in your excell sheet , you will automatically turn back into the Excell page . Jusr write any figures in cell A1 e.g 124.5 , and move cursor from cell A1 or highlight any other cell.

5) Go to Formula Bar and write " =SpellNumber(A1)     " as shown below :

6) Now press Enter u will get the desired result i.e now the numbers have been converted into " One hundred twenty four dollar and fifty cents" 

Now You can see the currency shown above is in " Dollar " If u wish to convert it into any other currency like " Dirhim" or Rs. Just go back to the module where u saved the code... and replace the word " Dollar" into any other currency " Rs. " , in the code and again save by presssing (Alt+Q)

now the words can be shown in the desired currency.

Thanks please make comments... If u have any further querry feel free to ask.