Basic Game Scenarios

MBS is a single product, one-to-four markets business game. Product demand is seasonal and affected by individual
market prices, product image and quality, and other economic factors. Each round of game can be considered a quarter of
the calendar time.

MBS has four models of game with a number of decisions. The game can accommodate up to 20 groups of players, up to 6
players with different management roles in a group. The CEO is a “super player” and can take on any extra roles if needed.
All players save their decisions temporarily and only CEO can submit the decisions for the company. Once decisions are
submitted, no change will be allowed.

Model 1 and 2 games are suitable for practice purpose because they have only one market and fewer decisions. These
games will introduce all players to familiarize the structure of the game, available reports and analysis, and decision-
making logics.

Model 3 and 4 games extend the business scenarios with four individual markets with different pricing and marketing
investment decisions. The production mode also allows up to three shifts a day to expand the capacity needed to meet the
potential demand.

Basic Game Settings

Market share deferred effect consists of three levels: high, moderate, and low.

Price elasticity indicates the effect of price competition in individual markets, and consists of three levels: high, moderate,
and low.

Marketing campaign impact indicates the promoting effect of marketing expense in individual markets, and consists of
levels: high, moderate, and low.

Product lifecycle affects individual markets, and consists of three levels: high growth, moderate growth, and low growth. A
product undergoes five stages: birth, growth, maturity, decay, and death. The cycle usually starts with 0, and its aggregate
value gradually increases with the development of market. Once the value reaches 2, the market becomes mature, and the
overall potential demand becomes saturated. The potential demand wanes afterwards with sales of each period
dwindling. Such value can be used to set three growth indexes of different life cycle: namely high, moderate, and low
growth.

R&D effect serves to influence product quality (and subsequently potential demand) and consists of three levels: high,
moderate, and low.

Production mode relates to the production policy of a company and will come in two modes of production: one shift (for
Model 1 and 2 games), and shift work (for Model 3 and 4 games).
• One shift: Working overtime increases throughput by at least a maximum of 0.5.
• Shift work: Available options include two shifts and three shifts. The shift choices are automatically decided by the
system in accordance with production quantity needed for the round.

Maintenance effect serves to influence production efficiency (coefficient of material change) and consists of three levels:
high, moderate, and low.
Page 1 of 24
 Management Dashboard

Once you log in to the system, management dashboard will be displayed with key performance indicators (KPIs) and
related information.

You should review carefully key business and economic conditions in Business overview > Environment before making any
decisions.

Page 2 of 24
 Economy Status Report

The Economy report (MBS > Status > Economy) provides you with information such as price index, economic growth rate,
seasonal indicators and the product lifecycle in each market. These indicators will affect the overall market to the same
extent, except for product lifecycle, which is market dependent.

Price index is a measurement of inflation and it will affect your pricing strategies, purchase cost of raw materials and
equipment. There are four types of inflation you may encounter in the game: severe inflation, moderate inflation, mild
inflation, and negative inflation (deflation).

Economic growth rate will affect the purchasing power and hence the potential demand.

Seasonal indicators will affect the potential demand of your company’s product. A seasonal indicator of 100 or more
indicate stronger demand than normal and vice versa.

Product lifecycle will affect the potential demand of your company’s product in individual markets.

Page 3 of 24
 Business Status Report

MBS > Status > Business status

Potential demand refers to the total amount of orders (product units) received by the company in the current round. And
is affected by the company's current and previous prices, marketing expenses, market share in the previous round,
deferred market potential in the previous round, economy, seasonal indices, and price fluctuations.

Current production is the maximum production volume in the current round, limited by available raw materials or
production capacity, whichever smaller.

Finished goods inventory = Finished goods inventory from last round + current production quantity – Current sales
quantity.

Market share (%) shows the company’s own share in each of markets.

Sales volume is the actual sales quantity of the company in the current round.

Next production capacity refers to the quantity of products that a single shift can produce without overtime.

Next production capacity = Current production capacity x (1 – Depreciation rate) + Current new equipment investment /
20 x Current price index
(See details on the Sales/Production Analysis section)

Page 4 of 24
 Sales/Production Analysis

The Sales/Production analysis (MBS > Analysis > Production/Logistics) provides you with information such as sales
volume, production capacity, raw material inventory, and finished goods inventory.

Sales volume refers the actual sales quantity of the company in the current round.

Production volume refers to the current production quantity, and is limited by available raw materials or production
capacity, whichever smaller. That is, when the quantity of available raw materials (inventory of the previous period +
material purchased in the current period) is insufficient or the production capacity is not enough to meet the production
request/allocation, the current production volume = the maximum production volume, which can be less than the
production request/allocation.

Next production capacity refers to the quantity of products that a single shift can produce without overtime work.

Next production capacity = Current production capacity x (1 – Depreciation rate) + Current new equipment investment /
20 x Current price index

Example: Current round = 8, Current capacity = 471,390, Depreciation = 2.5%, Current equipment investment = 300,000,
Current price index = 1.145.

Next production capacity = 471,390 (1 – 2.5%) + (300,000 /20)(1.145) = 459,605 + 17,175 = 476,780

Raw material inventory is the inventory quantity of raw materials at the end of the round.

Raw material inventory = Beginning raw material + Current purchase of raw material – Current consumption of raw
material

For reference: Business rules on equipment investment

For every 20 USD investment, the next period can gain production capacity increase by one unit. To avoid significant
increase in business risks, investment should be no more than half of the equity of each period.

Raw material inventory refers to the quantity of raw material at the end of the round.

Raw material inventory = Raw material inventory from previous round + Current purchase of raw material – Current
consumption of raw material

Finished goods inventory (Total) refers to the total quantity of raw material in all markets at the end of the round.

Finished goods inventory (Total) = Finished goods inventory from previous round + Current production volume – Current
sales volume
Page 5 of 24
 Demand–Supply Coordination Decisions of Individual Markets

To synchronize supply and demand, you can use sales and operations plan (SOP) as a tool. In MBS games, the following
business rules will be applied:

• Potential demand = f (Price, Marketing, and R&D expenses)

• Production capacity = f (Equipment investment and Maintenance)
• Max available sales volume in each market = Production allocation + Finished goods inventory
• Actual sales volume = Min (Potential demand, Max available sales volume)

The following diagram shows how the decisions related to potential demand, production capacity, and production
request/allocation. You enter these decision parameters in MBS > Business decisions > Make decisions.

The following diagram shows how Sales volume is determined in the MBS games.

Page 6 of 24
Maximum volume available for sales = Production allocation + Finished goods inventory

• If Potential demand ≤ Max available, then Actual sales volume = Potential demand
• If Potential demand > Max available, then Actual sales volume = Maximum volume available for sales, and the
unsatisfied demand will be reserved for the company in the next round (50%) and shared by other companies
(50%).

Sales volume of individual market = Sales volume x Individual potential demand / Aggregate potential demand

Production allocation = Current production capacity

= Previous production capacity x 0.975 + Previous equipment investment / (20 x T+3’s price index)

• If there is sufficient raw materials and production capacity, then Actual production = Production request or
allocation.
• If there are insufficient raw materials or insufficient production capacity, then Actual production = Min (Current
production capacity of finished goods, Available raw materials).
• Raw materials can, if inadequate, be supplemented by urgent procurement, and current production capacity is the
primary factor restricting actual production.
• In the event of insufficient raw materials or insufficient production capacity, production request or allocation will
be automatically replaced with the Sales volume x Individual potential demand / Aggregate potential demand for
respective market.
• Finished goods inventory can be sold in the respective market only.

Actual production allocation = Actual production volume x (Each market’s production request) / (Total production
request)

Page 7 of 24
 Production Capacity

The following diagram shows how the current production capacity and the actual production volume are determined.

Total production volume refers to the production capacity using either one shift (with maximum 50% overtime), two shifts
(with max 2.5 normal production capacity including overtime), or three shifts. The total production quantity will then be
used to allocate finished goods to each market based on their production request/allocation.

• If the sum of all production request allocation’s quantity is greater than the total production volume available,
finished goods will be proportionally distributed to each market respectively.
• If the sum of all production request/allocation’s quantity is less than the total production volume available,
finished goods will be distributed in full to each market and any leftover stock will become finished goods
inventory of each market respectively for the next round.

Page 8 of 24
 Important Cost Calculation and Description

Material-related costs

• Material consumption: Costs of raw materials consumed in actual production.

• Coefficient of raw material change: The number of finished goods produced with one unit of raw material,
influenced by maintenance expense.
• Raw Material unit cost (moving average) = [Current procurement payment + Previous raw material inventory
price] / [Current procurement quantity + Previous raw material inventory quantity]
• Price of actual material consumption: Quantity of current actual consumed raw material x Raw material unit cost
• Cost of goods sold adjustment (inventory liquidation): The calculation of cost and expense in Income Statement
includes only current cost but not the previous inventory cost. The revised cost of goods sold is aimed at
calculating the portion of beginning inventory consumed.

Labor cost

• One shift (for Model 1 and 2 games)

If Production volume ≤ Production capacity from one shift, then Labor cost = Unit cost x Actual production volume

If Production capacity from one shift < Production volume ≤ 1.5 times of Production capacity, then Labor cost =
Unit cost x Actual production volume from one shift work + 1.5 x Unit cost x Actual production volume from
overtime work

• Shifts work (for Model 3 and 4 games)

If Production ≤ Production capacity from one shift, then Labor cost = Unit cost x Actual production volume from
one shift work

If Production capacity from one shift < Production ≤ 1.35 times of Production capacity, then Labor cost = Unit cost
x Actual production volume from one shift work + 1.5 x Unit cost x Actual production volume from overtime work

If 1.35 times of Production capacity < Production ≤ Production capacity from 2-shift work, then Labor cost = Unit
cost x Actual production volume from 2-shift work

If Production capacity from 2-shift work < Production ≤ 2.5 times of Production capacity, then Labor cost = Unit
cost x Actual production volume from 2-shift work + 1.5 x Unit cost x Actual production volume from overtime
work

If 2.50 times of Production capacity < Production ≤ Production capacity from 3-shift work, then Labor cost = Unit
cost x Actual production volume from 3-shift work

Management expense

• One shift

If Production < Production capacity, then Management expense is calculated based on Fixed expenditure =
$150,000, and Variable expenditure rate = $0.32.

Management expense = [150,000 + 0.32 x Production capacity] x Price index

If Production > Production capacity, then Management expense is calculated based on Fixed expenditure =
$150,000, Variable expenditure ratio = $0.32, and Overtime allowance = $50,000.

Management expense = [150,000 + 0.32 x Production capacity + 50,000] x Price indexes

• Shifts work

If Production < Production capacity without shift, then Management expense = [150,000 + 0.32 x Production
capacity + 25,000] x Price indexes.

Page 9 of 24
 If 1.35 times of Production capacity < Production < Production capacity from 2-shift work, then Management
expense = (275,000 + 0.32 x Production capacity) x Price index.

If Production capacity from 2-shift work < Production < 2.5 times of Production capacity, then Management
expense = (295,000 + 0.32 x Production capacity) x Price index.

If 2.5 times of Production capacity < Production ≤ Production capacity from 3-shift work, then Management
expense = (400,000 + 0.32 x Production capacity) x Price index.

Miscellaneous Expense: (10,000 + 0.18 x Current production capacity) x Price index

Cost of shift change: The cost incurred whenever the current shift is different from the previous shift. An amount of
$100,000 x Price index x Absolute difference of shift change is incurred for every shift change, and is calculated with the
formula below:

Cost of shift change = $100,000 x Price index x │Current shift – Previous shift│

Finished goods inventory holding cost includes capital cost, management expense, and costs related to loss and
depreciation, and is calculated with the formula below:

$0.5 x Quantity of finished goods inventory x (Final standard cost / 3)

= $0.5 x Value of finished goods inventory x 1/3

Quantity of finished product inventory = Previous inventory + Current actual production volume – Current actual sales

Inventory value of finished goods = Current standard unit price x Quantity of finished goods inventory

Unit price of finished goods inventory (initial value = $3.00):

= [Previous standard unit price x (Previous inventory – Current actual sales) + $3 x Current actual production
volume x Price index] / Previous inventory + Current actual production volume – Current actual sales

Raw material stock holding cost = Price of initial raw material inventory x 5%

Shipping rate

1st Market $ 0.00 per unit x Warehouse quota (same location as the retail market, no shipping needed)

2nd Market $ 0.10 per unit x Warehouse quota

3rd Market $ 0.20 per unit x Warehouse quota

4th Market $ 0.80 per unit x Warehouse quota

Procurement cost is incurred in the course of procurement (for example, charge on procurement procedures, and
inspection fee during delivery) and is based on the procurement units.

Procurement unit Procurement cost

500,000 or less $40,000
500,001 - 1,000,000 $80,000
1,000,001 - 1,500,000 $120,000
1,500,001 - 2,000,000 $160,000
2,000,001 or more $200,000

Page 10 of 24
 Income Statement

The income statement (MBS > Performance > Financial statement) shows your company revenue, cost of goods sold,
operating expenses, and other business expenses for each round.

Labor cost is based on the actual production volume

and is affected by the price index.
Material consumption is based on the actual
production volume and is affected by the price index
and conversion rate (1 unit of raw material to produce
0.77 unit of finished goods).
Cost of goods sold adjustment is needed when there is
a difference between actual sales and production
volume during the current round, and then convert the
value.
Maintenance expense refers to the current decision of
the company.
Urgent purchase expense is the extra cost (e.g., for
order expedition) incurred when raw materials is not
enough to support the production request/allocation
and it will be automatically executed by the system.
Depreciation of 2.5% per round is applied based on the
equipment value.
Operating expense for purchasing is incurred during
the ordering process of the original materials, including
the requisition operation fee, transportation inspection
fee, etc.
Work shift change expense is incurred when the
number of shifts is changed.
Miscellaneous expense for equipment investment is
incurred during the ordering process of equipment.

Page 11 of 24
 Gross profit = Revenue – Cost of goods sold
Operating expenses consist of two major components:
Marketing expenses and Administrative expenses.
Marketing expense refers to the current decision of the
company and amount spent in each market.
R&D expense refers to the current decision of the
company for research and development.
Operating exp., ADM, Administrative and
miscellaneous expenses are management costs due to
the scale of production, semi-fixed costs related to
management, including management fees and
miscellaneous expenses.
Marketing report expense refers to the cost of buying
marketing reports.
Finished goods inventory holding expense includes
financial cost, loss of expired products, holding cost,
depletion of storage facilities, etc.
Raw material stock holding expense includes cost of
preserving materials and holding cost.
Financial expenses and interest expenses refers to
expenses incurred from bank loans, with interest rate
ranging from 5% to 15% per year.
Loan interest = Loan balance of the previous round x
Annual interest rate / 4.

Income tax is subject to a progressive tax system depending on the amount of operating profit (EBT) as follows:

Net operating profit in round Low Moderate High

Net profit < 200K 18% 22% 26%
200K < Net profit < 500K 28% 35% 42%
500K < Net profit < 1000K 38% 48% 58%
1000K < Net profit 44% 55% 66%

Investment credit is available if you have new equipment investment during the round and 3.5% of the equipment
expense can be deducted from the profit before tax is calculated.

Page 12 of 24
 Notes on Decision Variables

Price: $3 to $9 per unit.

Marketing expense directly affects order quantity, can be deferred, and has an impact on potential demand in each
market.

Production request/allocation refers to the total production volume from different markets, exclusive of finished product
inventory.

R&D expense affects product quality and potential demand, and it has an impact on potential demand of products, in each
market.

Purchasing quantity of raw materials will have a price range of $0.75 to $2, depending on industry demand. If the
quantity of raw material inventory settled at the end of the previous round is less than the proposed sum of planned
production, the program will automatically set the urgent procurement, in which the procurement quantity will be
allocated from the purchased materials of current round, with an additional charge ($1.50 per unit) for urgent
procurement (included in Raw material purchase expenditure as shown in the Cash flow statement):

Urgent procurement expense = Procurement quantity x $1.50

Equipment investment affects the production volume and Miscellaneous expense for equipment investment, which
includes insurance premiums, shipping rate, and relevant expenses.

Miscellaneous expense for equipment investment = 0.0000001 * Equipment investment expense

Maintenance expense will impact the production efficiency and material conversion rate and will subsequently affect
Material consumption (a major item in Cost of goods sold).

Dividend is the actual dividend payout made in each round, which is a major factor to determine NPV. If Owner’s equity is
less than $6,500,000, the program will automatically stop issuing dividend.

Bank loans and Repayment always occur at the beginning of a round. Loans are created based on your decision value and
in the event of cash deficit, the program will automatically create a borrowing (shown as abnormal liability in the balance
sheet). The amount of repayment is limited to the balance of cash at the end of previous round. If exceeding the total
liability, it will be automatically reduced by the program. Loans will bring about overheads and interests. Information of
interest rate is available at MBS > Business overview > Environment.

Page 13 of 24
 Ranking of Performance

NPV is the main scoring criterion, which is the net present value of dividend payout and change of company valuation over
all the rounds of game. Other scoring criteria (e.g., those associated with balanced scorecard) are also available for
selection.

K represents the discount rate which is determined by the game host

n is the number of rounds in which the game is in progress
Economic equity = Owner's equity - Equipment book value + Equipment replacement cost

DuPont chart helps identify those drivers for the performance of ROE (return on equity) and is available at MBS > Analysis
> DuPont chart.

Page 14 of 24
 Appendix
SIREN – Round 8
Marketing Total Sales/ Total Sales of
1,250,000/8,628,187 14.49%
Share  Market
Inventory Inventory left from
0 0
Rate  previous quarter

Revenue  Total Sales Revenue $8,403,000 $8,403,000

Expense Total Expense / Total ($931,515+$1,496,790+$162,256)/

30.83%
Ratio  Sales Revenue $8,403,000

Total Sales Revenue-Total $8,403,000-$5,364,424-$931,515-$1,496,790-$162,256-

Net Profit  $324,560
Expense $123,455

Financial Index – Round 8

Current Asset / Current
Current Ratio  ($13,419,239-$9,349,557) / $5,890,230 69%
Liabilities

Debt Ratio  Total Debt/ Total Asset $5,890,230/$13,419,239 43.89%

Total Asset Total Sales Revenue/
Total Asset $8,403,000/ $13,419,239 63%
Turnover 
Net Profit /
ROE  Shareholder’s Equity $333,559/$7,529,008 4.43%%

Page 15 of 24
 Growth Rate
Round 4 $6,053,864 0
Round 5 $7,813,194 ($7,813,194-$6,053,864)/ $6,053,864 29
Revenue Round 6 $9,416,841 ($9,416,841-$7,813,194)/ $7,813,194 21
Round 7 $9,9463024 ($9,9463024-$9,416,841)/ $9,416,841 0
Round 8 $6,403,000 ($6,403,000-$9,9463024)/ $9,9463024 -11

❖ Department Indicators
Planning Department – Round 8
Sales volume  Total Sales Quantity in this quarter 1,250,000 1,250,000

Potential demand is greater than

Potential Demand - Sales Volume 4,396,413-1,250,000 3,146,413
sales volume (forecast) 

Sales volume exceeds potential

Sales Volume - Potential Demand 0 0
demand (forecast) 

Forecasting error  Potential Demand - Sales Volume 4,396,413-1,250,000 3,146,413

Performance evaluation (points)  Sales Volume/Forecasting Error 1,250,000/3,146,413 0.4

Purchasing Department – Round 8

❖ Price Index = 1.145

Internal Cost of material consumption Expenditure in Production

@1.5*1,250,000/0.773
transfer Department of last quarter*Sales Volume/ Conversion $2,423,250
675
pricing Rate

Material Current quarter purchase material quantity*Price of raw

1,200,000*@1.719 2,062,800
purchase cost material in last quarter (Cash Flow Statement)

If raw material is not purchased good enough for the

Urgent purchase
Total Planned distribution quota, Urgent Purchase will 0 0
cost
be executed by system

Raw Material Raw material value of the last quarter (in balance
$3,149,392*0.05 $157,469
Holding Cost sheet)*5%

Cost of ($1,000,001 - $1,500,000) = $120,000 (from formula in

$1,200,000*1.145 $137,400
Purchasing menu) x price index

$2,062,800.00+$0+$15
Total  Sum of Expense $2,357,670
7,469+$137,400

Performance $2,423,250-
Internal transfer pricing - Total Expense $65,580.00
Assessment  $2,357,669.62

Page 16 of 24
 Production Department – Round 8
❖ Remarks: Internal transfer pricing formula = $4 x price index (1.00) x actual production volume
❖ Capacity = last quarter capacity x 0.975 or 0.9685 + equipment expense/20
❖ 471,390 is the capacity of Round 7 in Status Report

Internal
transfer $4*Price Index*Actual Production Volume $4*1.145*1,250,000 $5,725,000
pricing

Productivity is ranged between 2.5 and 3 shifts

Operating exp.-
formula: [400,000+(0.32*Capacity of last [$400,000+(0.32*471,390) *1.145] $630,717
ADM
quarter)*Price Index]

Maintenance
Decision by User $400,000 $400,000
fee

Labor costs Sales Volume*Labor Cost 1,250,000*$1.449 $1,811,625

Cost of
material
consumption( Sales Volume/Conversion Rate*@$1.5 1,250,000/0.774*1.5 $2,423,250
@1.5)Expendit
ure

Book value of production equipment in last

Depreciation quarter*depreciation rate (acceleration- $9,349,557*0.03125 $291,921
3.125%)

Shift cost If any shift is incurred 0 0

Equipment
investment Decision by User $9,000.00 $9,000
cost

Administrative
expenses and
[10,000 + 0.18*Capacity] * Price Index [10,000 + 0.18 *471.390]*1.145 $108,603
miscellaneous
expenses

630,717.296+$400,000+$1,811,62
Total  Sum of Expense 5+$2,423,250+$291,921+$9,000+$ $5,675,116
108,603

Performance
Internal transfer pricing-Total Expense $5,725,000-$5,675,116 $49,883
assessment 

Marketing Department – Round 8

200,000*$6.7=$1,340,000
Sales Volume of Individual 350,000*$6.5=$2,275,000
Revenue  $8,403,000
Market*Unit Price 480,000*$6.4=$3,072,000
220,000*$7.8=$1,716,000
Market1: $190,000
Marketing Market2: $100,000
Decision by User $580,000
Expense Market3: $90,000
Market4: $200,000
$96,000/$168,000/
R&D Expense Decision by User $600,000
$230,400/$105,600
Market1: $0*200,000*1.145 Market1: $0
Logistic Cost Transportation Cost*Sales*Price Index Market2: $0.1*350,000*1.145 Market2: $40,075
Market3: $0.2*480,000*1.1.45 Market3: $109,920

Page 17 of 24
 Market4: $0.8*220,000*1.145 Market4: $201,520
Total: $351,515
Inventory @$4*Finished Goods Inventory of last
@$4*0*1.145 $0
Holding Cost quarter*Sales*Price Index
Market1: $916,000
Market1: $4*200,000*1.145
Internal Market2: $1,603,000
Market2: $4*350,000*1.145
conversion @$4*Sales Volume*Price Index Market3: $2,198,400
Market3: $4*480,000*1.1.45
pricing Market4: $1,007,600
Market4: $4*220,000*1.145
Total: $5,725,000
Revenue-Marketing Expense-R&D
Performance $8,403,000-$580,000-$600,000-
Expense-Logistic Cost-Inventory $1,146,485
assessment  $351,515-$5,725,000
Holding Cost-Internal transfer pricing

Page 18 of 24
 Finance Department – Round 8

200,000*$6.7=$1,340,000

Sales Volume of Individual 350,000*$6.5=$2,275,000

Revenue  $8,403,000
Market*Unit Price 480,000*$6.4=$3,072,000

220,000*$7.8=$1,716,000

Financial expenses and

Current Debt*Interest Rate (10%/year
interest expenses - $5,890,230*0.025 $147,255
= 2.5%/ quarter)
Normal

Financial expenses and

interest expenses - If Emergency Purchase is incurred. 0 0
Abnormal

Financial expenses and interest

Total $147,255.77+$0 $147,255
expenses (Normal + Abnormal)

Performance
Revenue/Total $8,403,000/$147,255.77 $57.06
evaluation (points) 

Page 19 of 24
❖ Financial Statement

Income Statement – Round 8

❖ Unit Cost Calculation: Current quarter raw material cost + Last quarter remaining raw material cost / current
quarter raw material quantity + last quarter remaining raw material quantity.
❖ (2,062,800+3,149,392) / (1,200,000+1,912,315)
❖ 5,212,192/3,112,315
❖ 1.674699379722168
❖ Logistic Cost = Market 1 (0)/ Market 2 (0.1)/ Market 3 (0.2)/ Market 4 (0.8) * Price Index =
480,000*0.2*1.145=$109,920

Market1: Sales Volume*Unit Cost 200,000*$6.7=$1,340,000

Market Market2: Sales Volume*Unit Cost 350,000*$6.5=$2,275,000

$8,403,000
Revenue  Market3: Sales Volume*Unit Cost 480,000*$6.4=$3,072,000
Market4: Sales Volume*Unit Cost 220,000*$7.8=$1,716,000
Labor costs Sales Volume*Labor Cost 1,250,000*$1.449 $1,811,625
Material
consumption

Conversion Rate = Sales Volume/conversion rate*unit cost 1,250,000/0.774*1.67 $2,705,477

0.774

Unit Cost=$1.67

Modified cost of If raw material or finished goods inventory

$0 $0
goods sold are left from the last quarter

Maintenance fee Decision by User $ 400,000 $400,000

If raw material is not enough to support
Emergency the planned production quantities,
$0 $0
purchase cost emergency purchase will be executed by
system
Book value of production equipment of
Depreciation last quarter*accelerated depreciation $9,341,479*0.03125 $291,921
rate (3.125%)
($1,000,001 - $1,500,000) = $120,000 x
Cost of purchasing $120,000*1.145 $137,400
price index
Shift cost If number of shifts is changed $0 $0
Equipment
0.0000001 * [Equipment Investment]2 0.0000001 * [300,000]2 $9000
investment cost

$1,811,625+$2,705,477+$400, $5,355,424
Total - 1 Total Cost of Operation Expense 000+$291,921+$137,400+$90
00
Market1: Decision by User Market1: $190,000

Marketing Market2: Decision by User Market2: $100,000

$ 580,000
Expense Market3: Decision by User Market3: $90,000
Market4: Decision by User Market4: $200,000

Logistic Cost Transportation Cost*Sales*Price Index Market1: $0*200,000*1.145 Market1: $0

Page 20 of 24
 Market2: $0.1*350,000*1.145
Market2: $40,075
Market3: 0.2*480,000*1.1.45
Market4: $0.8*220,000*1.145 Market3: $109,920

Market4: $201,520

Total: $351,515

Total - 2 Marketing Expenses + Logistic Cost $580,000+$351,515 $931,515

R&D expenses Decision by User $600,000 $600,000
Administrative Operating exp.-ADM + Administrative
expenses and expenses and miscellaneous expenses $630,717+$108,603 $739,320
miscellaneous
expenses

Information costs Cost of Marketing Report $0 $0

Finished goods $0.5*Finished Good ($68,443)

inventory holding Inventory*Inventory value of finished $0.5*133,331*($3.08/3)
cost (Round 1) goods $68,532

Raw material Raw material value of the last quarter

3,149,392 x 0.05 $157,469
holding cost (in balance sheet)*5%
Total - 3 Total Cost of Operating exp.-ADM $600,000+$739,320+$157,469 $1,496,790
Non Operation
Cost
The outstanding loan of the last
Financial expenses $6,490,230*0.025 $162,256
quarter*10%/4 quarters
and interest
expenses

$8,403,000-
Pre-tax profit and Sales Revenue-Total (1+2+3)-Non
($5,355,424+$931,515+$1,496 $ 457,014
loss (EBIT)  Operation Expense
,790)-$162,256
❖ (457,015-200,000)*0.35 +
Profit-seeking 44000 = 133,955
Income Tax (Medium Rate)*(1+0×
Enterprise Income ❖ 133,955*(1+0×0.01)- $123,455
Tax 0.01)-Investment Credit*3.5%
300,000*0.035 = 123,455
After-tax profit
Pre-tax profit and loss- Profit-seeking
and loss (net $ 457,014-$123,455 $ 333,559
profit) 
Enterprise Income Tax

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❖ Financial Statement

Cash Flow – Round 8

❖ Repayment = The maximum amount of repayment can’t more than the cash balance (end) of last quarter, system
will reduce based on the cash balance (end) of last quarter. If the cash amount appears deficits, system will borrow
the loan from bank as abnormal liabilities.
❖ Interest = When the loan amount is less than share equity, the interest rate is 10% x 0.25

200,000*$6.7=$1,340,000

Sales Volume of Individual Market*Unit 350,000*$6.5=$2,275,000

Revenue  $8,403,000
Price 480,000*$6.4=$3,072,000
220,000*$7.8=$1,716,000

$5,355,424+$931,515+$1,496,
Total Expenditure-Depreciation-Cost of
Cash expenditure 790+$162,256-$291,921- $4,948,586
Raw Material
$2,705,477

Purchase expenditure
Price of raw materials Total Purchase Material*Price of raw
1,200,000*1.72 2,062,800
in the next period material in last quarter
$ 1.47
❖ (457,015-200,000)*0.35 +
Income Tax (Medium 44000 = 133,955
Profit-seeking
Rate)*(1+0*0.01)-Investment ❖ 133,955*(1+0*0.01)- $ 123,455
Enterprise Income Tax
Credit*3.5% 300,000*0.035 = 123,455

Equipment investment
Decision by User Decision by User $300,000
expenditure

Repayment Decision by User Decision by User $0

Loan Decision by User Decision by User $600,000

Dividend  Decision by User Decision by User $300,000

Revenue-Cash Expenditure-Purchase $8,403,000-$147,255-

Current cash flow  Expenditure-Income Tax-Equipment 2,062,800-$ 123,455-$300,000- $68,158
Investment Expenditure-Loan-Dividend $600,000-$300,000

Cash balance
Cash Balance End of Last Quarter $ 1,494,806 $ 1,494,806
(Beginning)

Cash balance (End)  Current Cash Flow + Cash Balance (End) $ 68,158+$ 1,494,806 $1,562,964

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❖ Financial Statement

Balance Sheet – Round 8

Costs in Finished Product Inventory

Including capital cost, management expense, and costs related to loss and depreciation, and calculated with the formula below:

$0.5 * quantity of final finished product inventory* [final standard cost/3] = $0.5 * price of final finished product inventory * 1/3

Unit price of finished product inventory [initial value = $3.00] =

(Previous standard unit price*[previous inventory – current actual sales] + $3 * current actual production * price index) / previous
inventory + current actual production – current actual sales
Quantity of final finished product inventory = previous inventory + current actual production – current actual sales

Finished product inventory price = final standard unit price * quantity of finished product inventory
❖ 3.44 =3 × 1.145

Cash Cash balance (End) $1,562,964 $1,562,964

Inventory value of
finished goods (Standard Finished Good left from last quarter $0 $0
unit price $ 3.44)

Raw material inventory 1,496,815*1.67469937972

Raw Material Inventory*Unit Value $2,506,716
value (Unit value $ 1.67) 2168

Book value of production Book Value of Production Equipment of

$9,341,479*(1-
equipment (Replacement last quarter*Depreciation (1- $9,349,557
0.03125)+300,000
cost $ 11,192,643.92) 3.125%)+Equipment Expense

Cash + Inventory Value of Finished Goods

$1,562,964+$ 2,506,716+$
Total Asset  and Raw Material + Book Value of $13,419,239
9,349,557
Production Equipment

Liabilities Liabilities of last quarter-Repayment $ 6,490,230-$600,000 $5,890,230

If any cash is not enough to procure

Abnormal Liabilities $0 $0
finished goods.

Total Liabilities  Liabilities+ Total Liabilities $5,890,230+$0 $5,890,230

Owner's equity  Total Asset-Total Liabilities $13,419,239-$5,890,230 $7,529,008

Total Liabilities and Total Asset= Total Liabilities + Owner

$5,890,230+$7,529,009 $13,419,239
Owners' equity Equity
❖ Financial Ratio
Cash Flow – Round 8

($1,562,964+$2,506,716)/
Current ratio  Current Asset / Current Liabilities 0.69
$5,890,230

Quick ratio  Liquid Asset / Quick Liability $1,562,964/$5,890,230 0.27

Sales Revenue/Finished Goods Inventory

Inventory turnover  $8,403,000/ (0+$2,506,716) 3.35
Value + Raw Material Inventory Value)

Fixed-asset turnover  Sales Revenue/ Average Net fix asset $8,403,000/$9,349,557 0.90

Total assets turnover Sales Revenue / Total Asset $8,403,000/$13,419,239 0.63



Debt ratio  Total Debt/ Total Asset $5,890,230/$13,419,239 43.89%

Page 23 of 24
 EBIT + Financial interest
Times interest earned
expense/ Financial Interest ($457,014+$162,256)/$162,256 3.82

Expense

Net profit margin  Net Profit/ Sales Revenue $333,559/ $8,403,000 3.97 %

($457,014+$162,256)/
Basic profit margin EBIT + Annual Interest Expense/ Total Asset 4.61 %
/$13,419,239

Return on Assets
Net Profit/ Total Asset $333,559/$13,419,239 2.49 %
(ROA)

Return On Common
Net Profit/ Owner's equity $333,559/$7,529,009 4.43 %
Equity (ROE)

Page 24 of 24