Managing your pocket money by HC121104025111

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									    Aims For Today

   Understand the concept of Break
    Even

   Be able to draw and interpret break
    even charts
    Who’s aim’s include…?

   Offering customers the best value for money and
    most competitive prices
   Meeting the needs of customers by constantly acting
    on their opinions
   Providing shareholders with progressive returns on
    their investment
   Developing the talent of its people while rewarding
    them fairly
   Supporting the well being of the community and the
    protection of the environment
    Quick recap on types of costs..

   Can you remember the
    definitions, and give examples of
    the different types of costs…?!

   And how about revenue &
    profit?!
  Direct Costs
Total costs can be further classified as
  Direct or Indirect…
 Direct: linked specifically to production of
  a particular good / service.
 E.g. raw materials and piece rate wages

 Fixed costs are normally the same as

  direct costs
    Indirect Costs (Overheads)

   Indirect or OVERHEADS: Cannot be linked specifically to
    production of a particular good. They are linked to other
    costs of running the business e.g. admin, marketing etc
   Can be difficult for managers to control…
   Overheads / indirect costs are usually fixed costs, but
    not always
    Fixed Overhead : admin / lighting / heating

    Variable Overhead : Commission payments to sales
    force or postage costs from mail order company
    What is Break even?

   The minimum sales level
    needed to make a profit…
    i.e….


   Total Revenue = Total Costs
Break Even
Output of     Sales     Total Costs
Ties (Per   Income (£     (£ Per
 Week)      Per Week)     Week)
   0            0         10,000
  100        4,000        11,500
  200        8,000        13,000
  300        12,000       14,500
  400        16,000       16,000
  500        20,000       17,500
  600        24,000       19,000
On a BREAK EVEN CHART…
 30,000



 25,000



 20,000

                                      Sales Income (£ Per
                                      Week)
 15,000
                                      Total Costs (£ Per
                                      Week)

 10,000



  5,000



     0
          0   200   400   600   800
     Break Even…
                    Fixed Costs
    Selling price per unit – variable costs per unit
= Break Even

   (How many ‘unit contributions’ are need
    to cover Fixed costs…)
    Businesses can use break even to…

   Estimate future levels of output to meet
    profit objectives

   Assess the impact of planned price
    changes on profit and break even levels

   Assess how changes in fixed and / or
    variable costs may affect profits
    Homework

   Read Unit 16 Break Even Analysis.



   For next lesson – Monday

(Remember this is what your assessment is
  based on!!)

								
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