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Presentation - Krog's Metalfab
Presentation - Krog's Metalfab
Group -4
CASE FACTS
Two Plants One at Chicago and other at Moline
Fire destroyed Chicago plant
Production affected , expenses incurred due to shifting of
work force
Insurance coverage : To compensate for lost profit
$5,079,094
$5,434,630
$3,845,499
$1,589,131
Lost profit(A*B)
$34,961
$0.0220
500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
30000
Sales Expense
25000
20000
15000
10000
5000
200000
400000
Sales $
600000
800000
0
0
Administrative Expense
COGS $
40000
35000
30000
25000
20000
15000
10000
5000
0
0
$0.89
$0.04
$0.93
$20,250.00
$243,000.00
Estimated Sales-2004
Estimated Cost
Estimated Profit
Actual Profit
$5,434,630.58
$5,297,857.62
$136,772.96
($724,210.00)
Lost Profit
$860,982
Aug-03
Apr-03
Sales
Cost
$602,210 $485,120
Variable Cost/ $
Sales
$0.44
$220,660.00
Estimated Profit
$400,096.00
Lost Profit
$1,124,306.00
$302,685 $353,584
Estimating Profit
Regression Method
Scatter Plot of Sales and Cost
600000
500000
Total Cost
400000
300000
y = 0.3651x + 259418
R = 0.6036
200000
100000
$0.37
$5,079,094.00
$5,434,630.58
$5,097,199.62
$337,430.96
($724,210.00)
Lost Profit
$1,061,640.96
0
0
Total Cost
500000
400000
300000
y = 0.437x + 220338
R = 0.9915
200000
100000
0
Variable
Component
2003 Sales
Predicted 2004
Sales
Estimated Cost
Estimated Profit
Actual Profit
Loss Profit
$0.44
$5,079,094.00
$5,434,630.58
$5,018,989.56
$415,641.02
($724,210.00)
$1,139,851.02
Recommendation
Accountants analysis incorrect because of large
proportion of fixed cost
Use regression method to estimate costs as it is more
accurate.
Data check is necessary before applying regression