Business Model Management Control System

Management Control System

Definition: Management control systems are the formal and informal structures put in place by a business that compare the goals and strategy of the organization against the actual outcomes. In other words, it measure how well the functions of a business and the business as a whole perform and meet objectives.

CVP - Cost Volume Profit Analysis

• TFC - Total Fixed Cost
• TVC - Total Variable Cost
• TC - Total Cost
• TR - Total Revenue
• BEP - Break Even Point

\[Total Cost =Everage Cost*Quanyity Total Fixed Cost \]

\[Total Cost = Total Revenue - Total Cost \]

\[Total Profit = Quantity * Price - (Quantity * Everage Cost + Total Fixed Cost) \]

\[Q.BEP = \frac{Total Fixed Cost}{(Price - Everage Cost)} \]

\[Technical Coefficient = \frac{Input}{Output} \]

\(Total Variable Cost\)	\(= Total Everage Cost * Quantity\)
	\(= Coeff.Tecn.input*Unit.Cost.Unit*Quantity.output\)
	\(= (\frac{Quantity_{input}}{Quantity_{output}})*Unit Cost_{input} * Quantity_{output}\)
	\(=Quantity_{input}*Unit Cost_{input}\)

\(RT.lin = P.medium * Quantity\)

\[Contribution Margin = Revenue - Variable Costs \]

Make Or Buy - Full Costing
\(Net Income \Leftrightarrow TR-TC\)

\(Make Differential \Leftrightarrow Buy Differential\)

	Sources	Lost	Differential(Sources - Lost of Revenue)
Revenue-	Source Revenue-	Lost of Revenue-	Differential revenue(Source Revenue-Lost of Revenue)
Cost=	Source cost=	Lost of Cost=	Differential Cost(Source Cost-Lost of Cost)=
Margin	Sourdce Margin	Lost of Margin	Differential Margin

Logic Step

• Understand what are the options(alternatives)
• Consider the differential elements depending on the previous options.

	Direct Cost	Indirect Cost
Fix Cost	√	√
Variable Cost	√

\[Total Cost = FC + VC = DC + IC \]

Long-Term Decision Tools - Investment Analysis
The evaluation of investments(Capital Budgeting)

• long-term cost curves
• Economies of scale
• Elements to be evaluated when choosing a plant

INVESTMENT

An investment is a long-term commitment of monetary resources against which it is hypothesized
the recovery of the money initially invesed(recovery of the investment)
a return on the amount investe appropriate to the duration and risk of the operation(return on investment)

f

	years 1-2	years3-4
Revenue
-Operating Cost
-Depreciation
=Gross Income
-Taxes
=Net Income
+Depreciation
=cash flow

Present Value (PV) is today’s value of money you expect from future income and is calculated as the sum of future investment returns discounted at a specified level of rate of return expectation.
Net present value (NPV) is used to calculate today’s value of a future stream of payments.
If the NPV of a project or investment is positive, it means that the discounted present value of all future cash flows related to that project or investment will be positive, and therefore attractive.
To calculate NPV, you need to estimate future cash flows for each period and determine the correct discount rate.

The current ccalue of all future cash flows generated by a project, including the initial capital investment.
It's used in capital budgeting to detemine if a project should be undertaken.

\[NPV = \frac{Cash Flow}{{(1+i)}^t} - Initial Investment \]

• i = Required return or discount rate
• t = Number of time periods

\[NPV = \sum_{t=0}^{R_t}\frac{R_t}{(1+i)^t} \]

\(R_t =\) net cash inflow - outflows during a single period t
\(i =\) discount rate or return that could be earned in alternative investments
\(t =\) number of time periods

NPV = Today's value of the expected cash flows -Today's value of invested cash