Acct Ch 11

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Turnover Formula

Sales / Average Operating Assets

Net operating income is

income before interest and income taxes have been deducted EBIT

throughput time

process time + inspection time + move time + queue time

manufacturing cycle efficiency

value added time(process time) / throughput time

Delivery Cycle Time

wait time + process time + inspection time + move time + queue time or wait time + throughput time

ROI Alternative formula

Margin X turnover

residual income

Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)

ROI Formula

Net Operating Income / Average Operating Assets

Margin Formula

Net Operating Income / Sales

average operating assets are

cash, accounts receivable, inventory, plant and equipment, and other productive assets.


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