• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Financial Control

Extracts from this document...

Introduction

Unit 3 - Investigating Financial Control Assignment a) What is break even? Break even occurs when income is equal to expenditure. It is the point of sales where the company sells enough products to cover all of the variable and fixed costs associated with producing a product. The next unit sold will start to generate profit for the company. In order to calculate the break-even point, it is necessary to know the following: * Fixed costs - These costs have to be paid, no matter how much is being produced e.g. rent, rates, heating and most staff wages. * Variable costs per unit - These costs are directly affected by the amount produced or sold e.g. raw materials, stock for resale, staff commission on sales and overtime payments. * Selling price per unit - The amount of money charged to the customer for each unit of a product or service. * Expected unit sales - The number of units of the product projected to be sold over a specific period of time. ...read more.

Middle

Example of fixed costs: * Rent * Wages * Heating * Electricity * Insurance * Advertising How break even can be calculated: The break even point can be calculated by means of a formula and also by the construction of a break even chart. Sales for break even = fixed costs / selling price per unit - variable cost per unit Example of break even: The variable cost for making one burger is �0.97 The fixed costs of making burgers for 18 months will be a total of: �140.000 The expected unit sales of 150,000 burgers for 18 months The unit price of the product is �1.99 With expected unit sales of 150000, �13,000 profit is made. b) E.g. 1 - Numerical example of break even Lawnmower business The figures used for both selling price and variable cost are both per unit. Lawnmowers are brought for �50 (Variable cost) and are to be sold at �80 each. The fixed costs for the business are 2,000. ...read more.

Conclusion

Margin of Safety: This is sometimes called the safety margin. This can be measured when the level of sales is above the break even point, basically when the business is profitable. The margin of safety is the number by which sales would have to fall before the break even point is reached. Going back to my example of the lawnmower business I have mentioned, if the sales were 85 then the margin of safety would be: 85 - 67 = 18 If Mr Hatzis was to sell 1000 kebabs, his margin of safety would be: 1000-500 = 500 units d) I am carrying out the same calculation of break even, but using the formula method instead of the chart to show Mr Hatzis how this is done: Sales for break even = �400 / 0.80 = 500units e) I am going to use actual sales figures from Mr Hatzis's first month of trading, with sales of 700 kebabs. i) Reduced the selling price to �1.50 per kebab. Total revenue = �1050 Total cost = �960 Profit = �90 ii) Cut overheads down to �200 Total revenue = �1120 Total cost = �760 Profit = �360 ?? ?? ?? ?? 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. Unit 3 - Investigating Financial Control

    Businesses can earn interest from the banks on an interest bearing account. The importance of costs and revenue to profit are that costs have to be kept to a minimal and revenue high to create maximum profit. To find out the profitability of the business you will need to calculate

  2. Management Accounting Report.

    over the initial cost times 100 over 1. What are the advantages of the accounting rate return? The advantages of the accounting rate return are: * It is easy to calculate * All cash flows are used * It is easy to understand the results What are the disadvantages of using accounting rate return?

  1. Costs, Profits and Break-even Analysis.

    changing and you need to look carefully at the outcome and comment on the changes and the decisions they may affect Good luck with the revision and don't let numbers get you down. People in Organisations When revising this essential area of any of the syllabuses/specifications you need to make

  2. Investigating financial control for a new restaurant.

    This is my vision for warrens restaurant. This slide shows the different cost figures. The formula for cost is Fixed cost + Variable cost = Total cost which is fixed cost 11566 + 4920 = 16486. This slide shows the costs that are going to be involved in Warren's restaurant.

  1. FINANCE ASSIGNMENT

    are code law countries." (Walton, Haller and Raffournier, 2003, pg 25). 2. FORMATS: Evident differences maybe noticed in the format adopted by different countries to report financial information. There are several tools like the Profit & Loss Account, the Balance Sheet, and Income Statement etc.

  2. Identifying and describing the main financial service needs for a student starting at university

    only need �10 to open an account and we'll pay you a special rate of interest * If you're over 18, you can open a Card cash account with just �50 We know it's not easy making ends meet when you're a student.

  1. Profitability & Reporting Assignment

    This means that removing Division 4 will cost or give the company a shortfall of �18,000. Task 1d) MEMORANDUM TO: Bob Harris From: Jane Jones Date: 01/10/2004 SUBJECT: Division 4 Having analysed the financial information and prepared necessary calculations, I have come to the conclusion that you should not close division 4.

  2. How can organisations ensure that their financial administration is going to guarantee their profitability ...

    For example Derbyshire County Council's Highway Safety Team distributes a newsletter to each of its schools. The newsletter is designed by a member of the team then it is sent to a printing company to carry out the finished design and print.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work