This resource provides an example of. an activity for a topic within Theme 2.



Similar documents
Flexible budgeting and cost behaviours

U3-LM2B-WS Molar Mass and Conversions

tutor2u tutor2u Interactive Business Simulations Finance: Cash Flow Management

Paper F5. Performance Management. Monday 2 December Fundamentals Level Skills Module. The Association of Chartered Certified Accountants

Checklists for Going into Business

Marginal and. this chapter covers...

Paper 3A: Cost Accounting Chapter 9 CA. Dharmendra Gupta

Activity 28.1 (page 509): Types of costs. Business Indirect cost Explanation. digger

simulation handout The Sports Company Managementsimulation - handout

Pricing decisions and profitability analysis

ACCOUNTING FOR NON-ACCOUNTANTS MARGINAL COSTING

Marginal and absorption costing

Published Mark Schemes for GCE AS Business Studies. January 2009

0450 BUSINESS STUDIES

Your business plan. helping you with your business planning and forecasting. Name of business. Date when completed

Skills Knowledge Energy Time People and decide how to use themto accomplish your objectives.

27Forecasting cash flows 27Activity 27.1 open-ended question.

The key tools of farm business analyses

Business Plan !!!!!!!!!!!!"#$%&'%()*+,$**% % -&,."/.%!"#$%! 0112$**%! 3$4$56&,$%!)#7$2%! 8&7+4$%!)#7$2%! 9#"+4%! :$7*+.$%! !!!!!!!!! ! "!

29.1 COST SHEET : MEANING AND ITS IMPORTANCE

What is a cost? What is an expense?

CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ. Semester 1 Examinations 20014/15

NATIONAL SENIOR CERTIFICATE GRADE 12

Workshop 6 The Building Blocks of Macroeconomics

GCSE Business Studies. Ratios. For first teaching from September 2009 For first award in Summer 2011

presents: your guide to understanding business finances

Paper F5. Performance Management. Monday 3 June Fundamentals Level Skills Module. The Association of Chartered Certified Accountants

Paper F5. Performance Management. Monday 14 December Fundamentals Level Skills Module. The Association of Chartered Certified Accountants

P2 Performance Management March 2014 examination

Paper F5. Performance Management. Monday 11 June Fundamentals Level Skills Module. The Association of Chartered Certified Accountants

Paper F2. Management Accounting. Fundamentals Pilot Paper Knowledge module. The Association of Chartered Certified Accountants. Time allowed: 2 hours

7115 BUSINESS STUDIES

Fundamentals Level Skills Module, Paper F5

The three most important things in retailing are location, location and location.

Macroeconomics: GDP, GDP Deflator, CPI, & Inflation

Chapter 10 Revenue, costs and break-even analysis

Housing Benefit / Council Tax Support Full self-employed income form

WHAT IS COST ACCOUNTING

Process Cutting Heating Assembly Hrs per unit Total hours available 100, , ,000

Revision point: Fixed costs are those that do not change with changes in production levels, e.g. rent.

FirstClass and The Cloud Communities

NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY

Buying and Setting up a Business with a Post Office A Guide

CHAPTER 12. Cost Sheet ( or) Statement of Cost ELEMENTS OF COST

Management Accounting 2 nd Year Examination

Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015

- 1 - Cost Drivers. Product Diversity - Difference in product size, product complexity, size of batches and set-up times cause product diversity.

ECON 103, ANSWERS TO HOME WORK ASSIGNMENTS

Fundamentals Level Skills Module, Paper F5. 1 Hair Co. (a)

Professional Level Skills Module, Paper P4

COSTS AND COSTING COST CENTRE ANALYSIS AND CONTROLLING FINANCES. Cost Centre Analysis. Cost Centre Analysis Exercises P 207

Paper F5. Performance Management. Monday 2 June Fundamentals Level Skills Module. The Association of Chartered Certified Accountants

ACCA Certified Accounting Technician Examination Paper T7. Section A. 2 C ($200,000 ($200, x 0 15)) = $50,000

Business Finance: Will I Make a Profit?

COST AND MANAGEMENT ACCOUNTING

Dealing with Pricing Challenges

Accounting Building Business Skills. Learning Objectives: Learning Objectives: Paul D. Kimmel. Chapter Fourteen: Cost-volume-profit Relationships

APPENDIX Business Description Current Position of Company Financing Request

UGA Inbound Week 7. Social Media, CTAs, Landing Pages & Thank You Pages

Chapter 3 Demand and supply

Make Your Working Capital Work

Exercises. Differential Analysis Sell (Alt. 1) or Lease (Alt. 2)

Module Title: Management Accounting 2

ICASL - Business School Programme

Management control systems

Cambridge International Examinations Cambridge International General Certificate of Secondary Education MAXIMUM MARK: 80

Homework 3 Managerial Economics MBA, NCCU

SMALL BUSINESS OWNER S HANDBOOK

Professional Development Programme on Enriching Knowledge of the Business, Accounting and Financial Studies (BAFS) Curriculum

Question Bank. Working Capital Management

BAFS Elective Part Accounting Module Cost Accounting

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions

Chapter 011 Project Analysis and Evaluation

Marginal Costing and Absorption Costing

NATIONAL 5 Accounting

BUSINESS SEMINAR SECURE YOUR BUSINESS AND FUTURE.

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Management Accounting 2 nd Year Examination

FINANCIAL INTRODUCTION

GCSE. Economics. Mark Scheme for June General Certificate of Secondary Education Unit A593: The UK Economy and Globalisation

1 P a g e Questions or comments? Contact us at TSLabs@TradeStation.com

5 steps to rid your small business of payroll stress

Submission From Link International Pty Ltd

Costing For Decision-Making Break Even Analysis. Break-even even Analysis

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

I. Executive Summary. II. The Business and its Product/Services

The following information has been obtained in relation to the contract:

2014 GLOBAL CUSTOMER SERVICE BAROMETER COMPARISON OF FINDINGS ACROSS MARKETS

At the end of Chapter 18, you should be able to answer the following:

Mark Scheme. Applied Business BS03. (Specification 8611/8613/8616/8617/8619) Unit 3: Financial Planning and Monitoring (External Test)

IGCSE Business Studies revision notes Finance

FINANCIAL STATEMENTS ANALYSIS - AN INTRODUCTION

Understanding Variance Analysis By: Helen O Brien Gately B Comm; MAcc; FCA. Examiner: Formation 2 Management Accounting

Copyright 2015 Pearson Canada Inc. 1

Optimising Your EAMS through Business Processes. Wyhan Jooste

Ratios from the Statement of Financial Position

Control Debt Use Credit Wisely


Transcription:

Planning Click to edit activity: Master Theme title style 2 Click to edit Master text styles This resource provides an example of an activity for a topic within Theme 2. The Planning Activity document suggests how this resource can be incorporated in lessons.

Capacity Click to edit utilisation Master title style Click to edit Master text styles Are you working hard enough?

Click to edit Master title style Click to edit Master text styles How many Third level hours homework could you do each evening?

Click to edit Master title style Click to edit Master text styles How many Third level hours homework could you actually do» Fifth each level evening?

Click to edit Master title style Click to edit Master text styles How many Third level hours homework could you do each evening? This is your full capacity.

Click to edit Master title style Click to edit Master text styles actual hours Third level worked each evening x 100% full capacity e.g. 1 hour x 100% = working at 33% capacity 3 hours

Click to edit Master title style Miah Enterpises Ltd produces state of the art widgets using the most up-to-date capital equipment Click to edit Master text styles The Second machine level is capable of producing 10,000 units per week. Fourth level Widgets are produced to order. Sales are currently 8,000 per week. actual output per week/month/year x 100% full capacity a)what is total capacity? b)what is actual output? c)calculate capacity utilisation

Click to edit Master title style The machine is capable of producing 10,000 units per week. Widgets are produced to order. Sales Click are to edit currently Master 8,000 text per styles week. Fixed costs are currently Second level 10,000 per week. a)calculate fixed costs per unit at full capacity b)calculate fixed costs per unit at the current level of sales c)what will happen to fixed cost per unit if the firm gets closer to full capacity? d)what impact will this have on profit?

Click to edit Master title style Selling price = 10/unit Variable Click to cost/unit edit Master = 2/unit text styles Gross Second margin level = 8/unit If fixed cost per unit = 1 then profit will be 7/unit If fixed cost per unit = 1.20 then profit will be 6.80/unit

Click to edit Master title style Selling price = 10/unit Click to edit Master text styles Variable cost/unit = 2/unit Gross margin = 8/unit If fixed cost per unit = 1 then profit will be 7/unit Fourth level Variable cost /unit = 2 At full capacity, fixed cost per unit is 1. Unit cost = 3 Selling price unit cost = 7 profit per unit. If fixed cost per unit = 1.20 then profit will be 6.80/unit At 80% capacity, fixed cost per unit is 1.20 Unit cost = 3.20 Selling price unit cost = 6.80 profit per unit.

Make Click up to edit your Master own business title style example Click to edit Master text styles Make up Third a level name for your business Full capacity Actual output Total fixed costs Variable unit cost Selling price per unit

Click to edit Master title style Copy these details from your partner Click full capacity to edit Master text styles actual Second output level total fixed costs variable unit cost selling price per unit

Click to edit Master title style a)what is total capacity? b)what Click to is edit actual Master output? text styles c) Calculate Second capacity level utilisation d)calculate fixed costs per unit at full capacity e)calculate fixed costs per unit at the current level of sales f) What will happen to fixed cost per unit if the firm gets closer to full capacity? g)what impact will this have on profit?

Low Click capacity to edit Master title style Click to edit Master text styles Causes could be: Demand side: e.g. product less fashionable e.g. product seasonal e.g. product income elastic in a recession Supply side e.g. new competitors

Low Click capacity to edit Master title style Click to edit Master text styles Consequences could be: High Third fixed level costs/unit will reduce profitability (may not be possible to increase prices) If visible could give a poor impression to potential customers Underused staff

Is Click low to capacity edit Master always title a style problem? Click to edit Master text styles In the long term yes High Third fixed level costs/unit will make the firm uncompetitive In the short-term possibly not It means that the firm can react quickly to a new order (could be useful if the firm is expanding into a new market) Time for maintenance and staff training So, it depends if it is a short-term or long-term problem

Full Click capacity to edit Master title style Click to edit Master text styles Good because fixed costs per unit are lower But Leaves no time for maintenance (could lead to breakdowns) Not possible to take on unexpected orders (the only way to increase output would be to buy a new machine) So 85-90% capacity might be better

Capacity Click to edit utilisation Master title style Click Capacity to edit is the Master v text styles of output a firm is capable of producing. Capacity utilisation Second measures level actual output as a percentage of the firm s capability. If the maximum» capacity Fifth level is 10,000 units a month and the actual output is 6,500 units, capacity utilisation is %. As fixed (o ) costs are related to maximum capacity, if the firm has low capacity utilisation, its fixed costs per unit will be and so too will be its average total costs per unit.

Capacity Click to edit utilisation Master title style Click Capacity to edit is the Master volume text of styles output a firm is capable of producing. Capacity utilisation measures Second actual level output as a percentage of the firm s capability. If the maximum capacity is 10,000 units» Fifth a level month and the actual output is 6,500 units, capacity utilisation is 65%. As fixed (overhead) costs are related to maximum capacity, if the firm has low capacity utilisation, its fixed costs per unit will be higher and so too will be its average total costs per unit.

Capacity Click to edit utilisation Master title style Click Capital to intensity edit Master raises text a styles separate issue. To what Second extent level are the total costs of the business weighted towards fixed capital (such as machinery)? Or is the business labour intensive, i.e. labour costs form a high proportion of total costs? The former case is more likely to be true of large firms (especially in the manufacturing sector) whereas the labour intensive firms are more likely to be firms especially in the sector.

Capacity Click to edit utilisation Master title style Click Capital to intensity edit Master raises text a styles separate issue. To what Second extent level are the total costs of the business weighted towards fixed capital (such as machinery)? Or is the business labour intensive, i.e. labour costs form a high proportion of total costs? The former case is more likely to be true of large firms (especially in the manufacturing sector) whereas the labour intensive firms are more likely to be smaller firms especially in the services/tertiary sector.

True Click or to false? edit Master title style Click Low capacity to edit Master utilisation text means styles low unit costs. Low Second capital level intensity means high labour costs per unit. High labour» Fifth intensity level may mean high costs but high flexibility and good customer service. High capacity utilisation keeps unit costs down as machinery and staff are being used productively. An increase in capital intensity might lead to redundancies.

Click to edit Master title style Six months ago, John Collins started up a retail business with overheads of 4,000 per week, including 900 on staff, 700 on rent Click and to the edit rest Master on the cost text of styles leasing a state-of-the-art automated supply system. This enables customers to order over the Second phone, the level internet or in person, and a robotic stockpicking system Third finds level the item and delivers it to a collection bay. Current unit Fourth sales level of 7,200 per week are close to the system s maximum capacity of 8,000 units. a)calculate the firm s % capacity utilisation b)calculate the capital intensity of John Collins business. c)a rival retailer has a labour intensity of 70%. Identify one advantage and one disadvantage to John Collins of its capital intensity.

Click to edit Master title style Calculate the firm s % capacity utilisation Click to edit Master text styles 72/80 = 90% Calculate the capital intensity of John Collins business. 24/40 = 60% A rival retailer has a labour intensity of 70%. Identify one advantage and one disadvantage to John Collins of its capital intensity. Advantage: speed, low wage costs Disadvantage: less face-to-face customer interaction, customer service poorer

Click to edit Master title style JT Co s fixed overheads of 600,000 a month pay for a maximum capacity of 200,000 units. Variable costs are 2 per Click unit, to the edit selling Master price text is styles 8 and current demand is for 120,000 units. a)what is JT Co s capacity utilisation? b)calculate JT Co s fixed costs per unit at 120,000 units and at maximum capacity c)explain how the above data enable you to know that JT Co s profit margin is 1 per unit at sales of 120,000 units, but 3 per unit at maximum capacity. d)calculate the % increase in the firm s total profit that would result from a sales increase from 120,000 to 200,000 units.

What is JT Co s capacity utilisation? Click to edit Master title style 12/20 = 60% Calculate Click JT to Co s edit fixed Master costs text per styles unit at 120,000 units and at maximum capacity 60/12 = 5; 60/20 = 3 Explain how the above data enable you to know that JT Co s profit margin is 1 per unit at sales of 120,000 units, but 3 per unit at maximum capacity. 8-2 = 6; 6-5 = 1; 6-3 = 3 Calculate the % increase in the firm s total profit that would result from a sales increase from 120,000 to 200,000 units. 600-120/120 = 48/12 = 400%