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

Management of costs.

Extracts from this document...

Introduction

Management of costs Fixed costs are the expenses that do not alter in relation to changes in demand or output (in the short term). They have to be paid whether the business trades or not. Examples are rent, depreciation and interest charges. Variable cost is the cost that varies in direct proportion to changes in output, such as raw materials, components, piece-rate labour and energy used in production. In other words, these are costs that should double if output doubles. Although break-even charts require the assumption that some costs vary in direct proportion to changes in output, in practice it is unlikely that any costs will be totally variable. For instance, raw materials are likely to cost less per unit when buying in bulk. Therefore the materials cost might not quite double when output doubles. Examples of variable costs are materials, labour e.t.c. Semi-variable costs are costs that vary with output, but not in direct proportion. Therefore, in order to calculate total costs at a specific level of output, a manager would have to work out the semi-variables especially. ...read more.

Middle

2 6000 10000 8000 4 3000 2 6000 12000 12000 4 4000 2 6000 14000 16000 4 5000 2 6000 16000 20000 4 Profit = �10 000 Output Variable Cost Fixed Costs Total Costs Total Revenue Selling Price 0 2 6000 6000 0 4 1000 2 6000 8000 4000 4 2000 2 6000 10000 8000 4 3000 2 6000 12000 12000 4 4000 2 6000 14000 16000 4 5000 2 6000 16000 20000 4 6000 2 6000 18000 24000 4 7000 2 6000 20000 28000 4 8000 2 6000 22000 32000 4 9000 2 6000 24000 36000 4 10000 2 6000 26000 40000 4 11000 2 6000 28000 44000 4 12000 2 6000 30000 48000 4 13000 2 6000 32000 52000 4 14000 2 6000 34000 56000 4 15000 2 6000 36000 60000 4 Task 4 Since Bradbury Plc already sells their chocolates at �5 per piece, this is the price that has been put forward by the supermarket Besco's. There are other things that will affect the their decision to produce the supermarkets own brand of Buzz chocolate. ...read more.

Conclusion

Divergences from a budget figure can be analysed by variance analysis. Budgets can be used as a discipline, a coordinator, a motivator, a monitoring and control device and a trigger for remedial action, as well as a test of forecasting ability. Badbury should prepare budgets because budgets have many different advantages and uses. There are many types of budgets: - Sales budget Purchases budget Production budget Cash budget Marketing budget Personnel budget Cash budget Master budget Task 8 Task 9 Task 10 Rent Mint- �3000*3/6*1/5000=0.3 Nut and choc- �3000*2/6*1/5000=0.2 Buzz- �3000*1/6*1/5000=0.1 Salaried Staff Mint- �2000*4/12*1/5000=0.1 Nut and choc- �2000*5/12*1*5000=0.6 Buzz- �2000*3/12*1/5000=0.1 Depreciation Task 11 Job card for the cake Cherries- 120/100=1.2 1.2*300g=�3.60 Sultanas- 0.65/250=0.26 2.6*1050g=�2.73 Currants- 0.55/250=0.22 2.2*675g=�1.48 Margarine- 0.95/250=0.38 3.8*750g=�2.85 Sugar- 1.50/1000=0.15 0.15*750g=�1.12 Eggs- 1.20/6=0.2 0.2*15g=�3.00 Almonds- 1.50/1.50=1 1*225g=�2.25 Flour- 1.00/1000=0.001 0.001*750=�0.75 To decorate: Marzipan- 1.75/500=0.35 0.35*1500=�5.25 Icing- 1.55/500=0.31 0.31*1500=�4.65 Preparation time- 5 hours *�5.50=�27.50 Cooking time- 6 hours*�1.50=�9.00 Total cost=�64.18 Profit-�16.00 Selling price=�80.18 Calculating the cost per unit for the batch of meals for the employees Total cost = 1729 Profit @ 25%=432.25 1729 + 432.25 = 2161.25 2161.25/100= �21.61 25% of �21.61= �5.40 �5.40 + �21.61 = �27.01 Management Accounting 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

Here's what a star student thought of this essay

4 star(s)

Response to the question

In summary, the report is quite good in the sections which are complete. The report states three different types of cost, and has given examples of the Net Present Value and Payback Period. However some parts are missing, and this ...

Read full review

Response to the question

In summary, the report is quite good in the sections which are complete. The report states three different types of cost, and has given examples of the Net Present Value and Payback Period. However some parts are missing, and this should be completed. The student understands three main terms, which is essential to understand break even analysis which is further below the report. The student has given an example, and worked out the 'Net Present Value' and worked out their 'Payback Period', which is necessary when a buisness evaluates an investment idea/concept. Task 6, 7, 8 & 9 are missing. This should be added to the report, before submitting to the examiner. In addition, Task 11 is quite unclear. The student should write a little and explain what this shows.

Level of analysis

The student has listed a number of assumptions and limitations with break even analysis. However the student hasn't justified why there might be some limitations within this method. The report could include 'With any accounting policy, there may be some limitations, as there are too many factors which could change. It' important to notice any factors which may effect the outcome of break even analysis'.

Quality of writing

The report states three main terms, these are 'Fixed Cost', 'Variable Cost' and 'Semi-Variable Cost'. These three terms are explained well within the report which should allow the exmainer to understand with ease. The student has in-putted a number of charts/graphs which help support the student's writing. This should allow the examiner to understand with ease with the use of these graphs/chars.


Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by danielbeal 05/04/2012

Read less
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. BREAK-EVEN ANALYSIS OF MCDONALDS

    * Development (property and construction) * Finance (supply chain and new product development) * Marketing (sales marketing) * Human Resources (customer services, personnel, hygiene and safety) HOW CAN BREAK-EVEN ENABLE MCDONALD TO MEET AIM & OBJECTIVE Every business aims to make a profit to expand and don't want to make a loss.

  2. What are the major risks that financial intermediaries face and how do they manage ...

    The resource allocation is the third way of managing risk; this is done by analysing the market and looking at the areas which yield higher returns. After doing this resources can then be allocated into areas where there is a high yield and less risk and some of the resources

  1. Errors that do not affect the Trial Balance.

    Such an error occurs when errors cancel out each other due to by coincidence having the same amounts. When this happens the other part of the transaction should be added.

  2. Hampton Machine Tools Company Case

    The projections were based on the forecast of shipments made on 1978 and on August 1979, as shown in Exhibits A.1 and A.2, respectively. These were made to assess the profitability of the company during the duration of the loan and find out whether it can generate the needed cash to pay the bank.

  1. The business plan

    The percentage mark-up = profit. From the results of the questionnaire, 64% of respondents said that keeping prices low is important (See Appendix 1.10). So from this point "Have A Break" will decide on a suitable price by decreasing certain percent (But the price will be just a little lower)

  2. Comsat case

    find this premium is to survey portfolio managers about their spread in expected returns between stocks and bonds. A third way to calculate the risk premium is to use the spread of a comparable company. According to Brigham and Houston, the typical risk premium usually falls between three to five

  1. Give an explanation of break-even analysis and explain how it supports the achievement of ...

    * Assess the impact of planned prices, changes upon profit and the level of output needed to break-even. * Assess how changes in fixed and/or variable costs may affect profits, and the level of output necessary to break-even. * Take decisions on whether to produce their own products or whether to purchase from external sources.

  2. Activities of Tesco finance function.

    Banks are an important source of finance for Tesco. Also high streets banks lend money to Tesco. Large companies like Tesco have a wide range of choice of options and will be advised by their financial manager, they will access all the different ones.

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