Production unit’s overhead cost allocation with activity-based costing in food industry enterprise

The main objective of this Master’s thesis is to develop a cost allocation model for a leading food industry company in Finland. The goal is to develop an allocation method for fixed overhead expenses produced in a specific production unit and create a plausible tracking system for product costs. The second objective is to construct an allocation model and modify the created model to be suited for other units as well. Costs, activities, drivers and appropriate allocation methods are studied. This thesis is started with literature review of existing theory of ABC, inspecting cost information and then conducting interviews with officials to get a general view of the requirements for the model to be constructed. The familiarization of the company started with becoming acquainted with the existing cost accounting methods. The main proposals for a new allocation model were revealed through interviews, which were utilized in setting targets for developing the new allocation method. As a result of this thesis, an Excel-based model is created based on the theoretical and empiric data. The new system is able to handle overhead costs in more detail improving the cost awareness, transparency in cost allocations and enhancing products’ cost structure. The improved cost awareness is received by selecting the best possible cost drivers for this situation. Also the capacity changes are taken into consideration, such as usage of practical or normal capacity instead of theoretical is suggested to apply. Also some recommendations for further development are made about capacity handling and cost collection.

Market anomalies and tactical asset allocation: Utilising market anomalies in multiple asset class portfolios with the Black−Litterman model

This thesis discusses the basic problem of the modern portfolio theory about how to optimise the perfect allocation for an investment portfolio. The theory provides a solution for an efficient portfolio, which minimises the risk of the portfolio with respect to the expected return. A central feature for all the portfolios on the efficient frontier is that the investor needs to provide the expected return for each asset. Market anomalies are persistent patterns seen in the financial markets, which cannot be explained with the current asset pricing theory. The goal of this thesis is to study whether these anomalies can be observed among different asset classes. Finally, if persistent patterns are found, it is investigated whether the anomalies hold valuable information for determining the expected returns used in the portfolio optimization Market anomalies and investment strategies based on them are studied with a rolling estimation window, where the return for the following period is always based on historical information. This is also crucial when rebalancing the portfolio. The anomalies investigated within this thesis are value, momentum, reversal, and idiosyncratic volatility. The research data includes price series of country level stock indices, government bonds, currencies, and commodities. The modern portfolio theory and the views given by the anomalies are combined by utilising the Black-Litterman model. This makes it possible to optimise the portfolio so that investor’s views are taken into account. When constructing the portfolios, the goal is to maximise the Sharpe ratio. Significance of the results is studied by assessing if the strategy yields excess returns in a relation to those explained by the threefactormodel. The most outstanding finding is that anomaly based factors include valuable information to enhance efficient portfolio diversification. When the highest Sharpe ratios for each asset class are picked from the test factors and applied to the Black−Litterman model, the final portfolio results in superior riskreturn combination. The highest Sharpe ratios are provided by momentum strategy for stocks and long-term reversal for the rest of the asset classes. Additionally, a strategy based on the value effect was highly appealing, and it basically performs as well as the previously mentioned Sharpe strategy. When studying the anomalies, it is found, that 12-month momentum is the strongest effect, especially for stock indices. In addition, a high idiosyncratic volatility seems to be positively correlated with country indices on stocks.

Optimal processing chain for waste power plant

This study is done to examine waste power plant’s optimal processing chain and it is important to consider from several points of view on why one option is better than the other. This is to insure that the right decision is made. Incineration of waste has devel-oped to be one decent option for waste disposal. There are several legislation matters and technical options to consider when starting up a waste power plant. From the tech-niques pretreatment, burner and flue gas cleaning are the biggest ones to consider. The treatment of incineration residues is important since it can be very harmful for the envi-ronment. The actual energy production from waste is not highly efficient and there are several harmful compounds emitted. Recycling of waste before incineration is not very typical and there are not many recycling options for materials that cannot be easily re-cycled to same product. Life cycle assessment is a good option for studying the envi-ronmental effect of the system. It has four phases that are part of the iterative study process. In this study the case environment is a waste power plant. The modeling of the plant is done with GaBi 6 software and the scope is from gate-to-grave. There are three different scenarios, from which the first and second are compared to each other to reach conclusions. Zero scenario is part of the study to demonstrate situation without the power plant. The power plant in this study is recycling some materials in scenario one and in scenario two even more materials and utilize the bottom ash more ways than one. The model has the substitutive processes for the materials when they are not recycled in the plant. The global warming potential results show that scenario one is the best option. The variable costs that have been considered tell the same result. The conclusion is that the waste power plant should not recycle more and utilize bottom ash in a number of ways. The area is not ready for that kind of utilization and production from recycled materials.

Extreme Observables and Optimal Measurements in Quantum Theory

Optimization of quantum measurement processes has a pivotal role in carrying out better, more accurate or less disrupting, measurements and experiments on a quantum system. Especially, convex optimization, i.e., identifying the extreme points of the convex sets and subsets of quantum measuring devices plays an important part in quantum optimization since the typical figures of merit for measuring processes are affine functionals. In this thesis, we discuss results determining the extreme quantum devices and their relevance, e.g., in quantum-compatibility-related questions. Especially, we see that a compatible device pair where one device is extreme can be joined into a single apparatus essentially in a unique way. Moreover, we show that the question whether a pair of quantum observables can be measured jointly can often be formulated in a weaker form when some of the observables involved are extreme. Another major line of research treated in this thesis deals with convex analysis of special restricted quantum device sets, covariance structures or, in particular, generalized imprimitivity systems. Some results on the structure ofcovariant observables and instruments are listed as well as results identifying the extreme points of covariance structures in quantum theory. As a special case study, not published anywhere before, we study the structure of Euclidean-covariant localization observables for spin-0-particles. We also discuss the general form of Weyl-covariant phase-space instruments. Finally, certain optimality measures originating from convex geometry are introduced for quantum devices, namely, boundariness measuring how ‘close’ to the algebraic boundary of the device set a quantum apparatus is and the robustness of incompatibility quantifying the level of incompatibility for a quantum device pair by measuring the highest amount of noise the pair tolerates without becoming compatible. Boundariness is further associated to minimum-error discrimination of quantum devices, and robustness of incompatibility is shown to behave monotonically under certain compatibility-non-decreasing operations. Moreover, the value of robustness of incompatibility is given for a few special device pairs.

PERFORMANCE ANALYSIS OF A TACTICAL ASSET ALLOCATION – Evidence from the Black–Litterman model based fixed income portfolio

Over time the demand for quantitative portfolio management has increased among financial institutions but there is still a lack of practical tools. In 2008 EDHEC Risk and Asset Management Research Centre conducted a survey of European investment practices. It revealed that the majority of asset or fund management companies, pension funds and institutional investors do not use more sophisticated models to compensate the flaws of the Markowitz mean-variance portfolio optimization. Furthermore, tactical asset allocation managers employ a variety of methods to estimate return and risk of assets, but also need sophisticated portfolio management models to outperform their benchmarks. Recent development in portfolio management suggests that new innovations are slowly gaining ground, but still need to be studied carefully. This thesis tries to provide a practical tactical asset allocation (TAA) application to the Black–Litterman (B–L) approach and unbiased evaluation of B–L models’ qualities. Mean-variance framework, issues related to asset allocation decisions and return forecasting are examined carefully to uncover issues effecting active portfolio management. European fixed income data is employed in an empirical study that tries to reveal whether a B–L model based TAA portfolio is able outperform its strategic benchmark. The tactical asset allocation utilizes Vector Autoregressive (VAR) model to create return forecasts from lagged values of asset classes as well as economic variables. Sample data (31.12.1999–31.12.2012) is divided into two. In-sample data is used for calibrating a strategic portfolio and the out-of-sample period is for testing the tactical portfolio against the strategic benchmark. Results show that B–L model based tactical asset allocation outperforms the benchmark portfolio in terms of risk-adjusted return and mean excess return. The VAR-model is able to pick up the change in investor sentiment and the B–L model adjusts portfolio weights in a controlled manner. TAA portfolio shows promise especially in moderately shifting allocation to more risky assets while market is turning bullish, but without overweighting investments with high beta. Based on findings in thesis, Black–Litterman model offers a good platform for active asset managers to quantify their views on investments and implement their strategies. B–L model shows potential and offers interesting research avenues. However, success of tactical asset allocation is still highly dependent on the quality of input estimates.

Economic capital allocation

For my Licentiate thesis, I conducted research on risk measures. Continuing with this research, I now focus on capital allocation. In the proportional capital allocation principle, the choice of risk measure plays a very important part. In the chapters Introduction and Basic concepts, we introduce three definitions of economic capital, discuss the purpose of capital allocation, give different viewpoints of capital allocation and present an overview of relevant literature. Risk measures are defined and the concept of coherent risk measure is introduced. Examples of important risk measures are given, e. g., Value at Risk (VaR), Tail Value at Risk (TVaR). We also discuss the implications of dependence and review some important distributions. In the following chapter on Capital allocation we introduce different principles for allocating capital. We prefer to work with the proportional allocation method. In the following chapter, Capital allocation based on tails, we focus on insurance business lines with heavy-tailed loss distribution. To emphasize capital allocation based on tails, we define the following risk measures: Conditional Expectation, Upper Tail Covariance and Tail Covariance Premium Adjusted (TCPA). In the final chapter, called Illustrative case study, we simulate two sets of data with five insurance business lines using Normal copulas and Cauchy copulas. The proportional capital allocation is calculated using TCPA as risk measure. It is compared with the result when VaR is used as risk measure and with covariance capital allocation. In this thesis, it is emphasized that no single allocation principle is perfect for all purposes. When focusing on the tail of losses, the allocation based on TCPA is a good one, since TCPA in a sense includes features of TVaR and Tail covariance.

Optimal distance of the light-curing tip for light transmission through the resin composite

Hammaslääketieteessä käytetettävien komposiittien valonläpäisevyys vaihtelee. Samoin LED-valokovettimet eroavat toisistaan valotehonsa ja muotoilunsa perusteella. On yleisesti tiedossa, että valokovettimesta tulevan valon intensiteetti pinta-alayksikköä kohden heikkenee, kun kovettimen etäisyys kasvaa. Toisaalta ei ole tiedossa, miten valokovetettavan kohteen ja valokovettimen kärjen väliin sijoitettu materiaali tarkalleenottaen vaikuttaa valon intensiteettiin eri etäisyyksiä käytettäessä. Tämän tutkimuksen tarkoituksena on selvittää, miten valokovetettavan kohteen ja valokovettimen kärjen väliin asetettava etukäteen polymerisoitu materiaali vaikuttaa valon intensiteettiin eri etäisyyksillä. Tutkimus suoritettiin käyttämällä kahta eri valokovetinta. Jotta etäisyyden vaikutusta valotustehoon voitiin demonstroida, vaihdettiin kovettimen etäisyyttä sensorista 0,2,4,6,8,10mm välillä. Valotehot rekisteröitiin MARC resin calibrator -laitteella. Sensorin ja valokovettimen kärjen väliin asetettavat erilaiset komposiittilevyt olivat valmiiksi kovetettuja,1mm paksuisia, filleripitoisuuksiltaan neljää erilaista muovia. Valotehot rekisteröitiin jokaiselta etäisyydeltä komposiitin ollessa sensorin päällä. Rinnakkaisesti verrattiin myös etäisyyden vaikutusta valotehoon ilman esikovetettua materiaalia kovettimen kärjen ja valoa mittaavan sensorin välissä. Vertailun suorittamiseksi laskettiin intensiteettisuhdeluku muovillisen ja muovittoman arvon välillä aina tietyllä etäisyydellä Valokovettimen kärjen etäisyyden kasvattaminen sensorista (eli valokovetettavasta kohteesta) odotusten mukaisesti pienensi valotehoa. Laittamalla sensorin ja kovettimen väliin komposiittilevy, valoteho pieneni odotetusti vielä enemmän. Tutkittaessa intensiteettisuhdetta (valoteho muovin kanssa : valoteho ilman muovia) kuitenkin huomattiin, että 4-6mm:n kohdalla suhdeluku oli suurempi kuin 0,2,8 ja 10mm kohdalla. Johtopäätöksenä oli, että suurin mahdollinen valokovetusteho saavutetan laittamalla kovetuskärki mahdollisimman lähelle kohdetta. Jos valokovetettavan kohteen ja valokovettimen kärjen välissä oli kiinteä komposiittipalanen, suurin mahdollinen valokovetusteho kohteeseen saavutetaan edelleen laittamalla kovetuskärki kiinni muoviin. Jos etäisyyttä muovin pinnasta sen sijaan kasvatettiin, valokovetusteho ei laskenutkaan niin nopeasti kuin oli odotettu. Tämä voi liittyä siihen, että tehokkaan valokeilan halkaisijan koko on suurempi verrattuna komposiitin sekä sensorin halkaisian kokoon. Toiseksi on arvioitu, että resiinikomposiitin täyteaineet voisivat fokusoida läpi kulkevaa valoa sensoriin. Se, pitääkö tämä ilmiö paikkansa, vaatii kuitenkin enemmän tutkimusta

Optimal Recycling Combination of Ash in South-East Finland

The present world energy production is heavily relying on the combustion of solid fuels like coals, peat, biomass, municipal solid waste, whereas the share of renewable fuels is anticipated to increase in the future to mitigate climate change. In Finland, peat and wood are widely used for energy production. In any case, the combustion of solid fuels results in generation of several types of thermal conversion residues, such as bottom ash, fly ash, and boiler slag. The predominant residue type is determined by the incineration technology applied, while its composition is primarily relevant to the composition of fuels combusted. An extensive research has been conducted on technical suitability of ash for multiple recycling methods. Most of attention was drawn to the recycling of the coal combustion residues, as coal is the primary solid fuel consumed globally. The recycling methods of coal residues include utilization in a cement industry, in concrete manufacturing, and mine backfilling, to name few. Biomass combustion residues were also studied to some extent with forest fertilization, road construction, and road stabilization being the predominant utilization options. Lastly, residues form municipal solid waste incineration attracted more attention recently following the growing number of waste incineration plants globally. The recycling methods of waste incineration residues are the most limited due to its hazardous nature and varying composition, and include, among others, landfill construction, road construction, mine backfilling. In the study, environmental and economic aspects of multiple recycling options of thermal conversion residues generated within a case-study area were studied. The case-study area was South-East Finland. The environmental analysis was performed using an internationally recognized methodology — life cycle assessment. Economic assessment was conducted applying a widely used methodology — cost-benefit analysis. Finally, the results of the analyses were combined to enable easier comparison of the recycling methods. The recycling methods included the use of ash in forest fertilization, road construction, road stabilization, and landfill construction. Ash landfilling was set as a baseline scenario. Quantitative data about the amounts of ash generated and its composition was obtained from companies, their environmental reports, technical reports and other previously published literature. Overall, the amount of ash in the case-study area was 101 700 t. However, the data about 58 400 t of fly ash and 35 100 t of bottom ash and boiler slag were included in the study due to lack of data about leaching of heavy metals in some cases. The recycling methods were modelled according to the scientific studies published previously. Overall, the results of the study indicated that ash utilization for fertilization and neutralization of 17 600 ha of forest was the most economically beneficial method, which resulted in the net present value increase by 58% compared to ash landfilling. Regarding the environmental impact, the use of ash in the construction of 11 km of roads was the most attractive method with decreased environmental impact of 13% compared to ash landfilling. The least preferred method was the use of ash for landfill construction since it only enabled 11% increase of net present value, while inducing additional 1% of negative impact on the environment. Therefore, a following recycling route was proposed in the study. Where possible and legally acceptable, recycle fly and bottom ash for forest fertilization, which has strictest requirements out of all studied methods. If the quality of fly ash is not suitable for forest fertilization, then it should be utilized, first, in paved road construction, second, in road stabilization. Bottom ash not suitable for forest fertilization, as well as boiler slag, should be used in landfill construction. Landfilling should only be practiced when recycling by either of the methods is not possible due to legal requirements or there is not enough demand on the market. Current demand on ash and possible changes in the future were assessed in the study. Currently, the area of forest fertilized in the case-study are is only 451 ha, whereas about 17 600 ha of forest could be fertilized with ash generated in the region. Provided that the average forest fertilizing values in Finland are higher and the area treated with fellings is about 40 000 ha, the amount of ash utilized in forest fertilization could be increased. Regarding road construction, no new projects launched by the Center of Economic Development, Transport and the Environment in the case-study area were identified. A potential application can be found in the construction of private roads. However, no centralized data about such projects is available. The use of ash in stabilization of forest roads is not expected to increased in the future with a current downwards trend in the length of forest roads built. Finally, the use of ash in landfill construction is not a promising option due to the reducing number of landfills in operation in Finland.