1. CTC 475 Review Breakeven Problems Determine equations for TR, TC, NP Maximize/minimize nonlinear equations by taking derivative, setting = 0, and solving for D Find breakeven value(s) by setting TR=TC

2. CTC 475 Cost Estimates & Accounting Principles

3. Objectives Know the different types of cost estimates Understand balance sheets Understand income statements

4. Cost Estimates Many times costs for a project must be estimated Three general types Order-of-Magnitude (+/-50%) Preliminary Estimates (+/-20%) Detailed Estimates (+/-5%) As the precision of the estimate improves, the cost of making the estimate increases

5. Estimate Example Item numbers & Description Unit (CM, EA, LS) Quantity & Price Specs describe how item is to be paid

6. Estimate Example Historical Costs can be found in company records or govt. documents (ex. Bid Price Book)Bid Price Book) Other Sources for prices (Means, manufacturer’s data, etc)

7. Estimate Example When project goes out to bid, each contractor creates an estimate The contractor with the lowest bid usually gets the job

8. Accounting Principles Primary function is recording, classifying, summarizing and interpreting the financial data of an organization

9. Two Basic Financial Reports Balance Sheet (Statement of Financial Conditions) Income Statement (Profit and Loss Statement)

10. Balance Sheet As of a particular date (snapshot in time): Tally Assets Tally Liabilities Assets – Liabilities = Net Worth Goal is to increase net worth over time

11. Handout Your Personal Balance Sheet

12. Assets Current – Can be converted easily into cash (<1 year) Cash Work in progress Finished goods inventory Fixed – Cannot easily be converted into cash Land Building

13. Liabilities Current – Debts due and payable (<1 year) Account payable Notes payable Interest payable Fixed – Long term debt Bonds payable

14. Balance Sheet Assets – Liabilities = Net Worth or Assets = Liabilities + Net Worth

15. Net Worth Also known as equity

16. Balance Statement Company Example Balance Sheet

17. Depreciation / Book Value Depreciation Reserve: Funds held to repurchase an asset (building, machinery) when its useful life terminates Book Value (asset): First cost – depreciation reserve Many assets lose value over time

18. Income Statement The income statement is usually more useful of the two reports since: The annual revenues/costs for various elements are identified

19. Income Statement-Basic Format Sales Less Cost of Goods Sold= Gross Profit Less “All other expenses”= Net Profit (Before Taxes) Less Income Taxes = Net Profit (After Taxes)

20. Income Statement Over a particular time period (ex. year): Tally Income Tally Expenses Income – Expenses = Net Profit (loss)

21. Handout Your Household Budget

22. Income Statement Company Example Income Statement

23. Next lecture Job Quotes Present Economy Problems