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Business Studies U4
Business Studies Unit 4
| Question | Answer | ? |
|---|---|---|
| Correlation | measurement of how close a cusal link there is between 2 or more sets of numerical data. High correlated data->predictable pattern->forms ~straight line. Danger is to make assumption about cause and effec. | (blank) |
| Design mix | how the firm combines 3 key desigh elements on order to fit the market gap that has been idnetified. | There are: 1. Aesthetoc appeal, 2. Function, 3. Economic manufacture |
| Extrapolation | in forecastin the near future it can be assumed the recent past will be a good guide. ->extrapolating from the past to the future. When trend values have been established, they can be plotted on a graph and exptrapolating can be taken | (blank) |
| Forecasting | estimating future outcomes such as next years sales figures. ->can only be guessed, aim is to base this in best possible information such as:1. Extrapolating, 2. Market research into cons. Buying intentions, 3. Consulting expert to anticipate trends (delp | (blank) |
| Launch | programme of stockpiling, distribution, advertising and publicity required to thrust a new product before it's target market.Launch may be local or national depending on firms confidence, available production capacity and any known regional taste differen | 3 phases: 1. Trade advertising plus aggresive salesforce activity to get wholesalers and retailers to stock product, 2. a large-scale merchandising campaign to achieve high visibility at point of sale, e.g. display stands, 3. advert camp, TV com, poster |
| NPD | =>New Product Development, implies all fundtions required to identify, develop and market new product opportunities. Requires close cooperation between R&D, market research and general marketing functions. | Most of NPD's is based on qualitative research, in which psychologists probe for the reasons behind consumers attitudes and actions. |
| R&D | Research & Development , (R&D) means scientific research and technical development. This is directed at improving the product, rather than at finding out what consumers want | (blank) |
| Sales Budget | target level of sales revenue for a period of time, usually 1 year. Budgets are set after adjusting the forecast sales figures in line with firms overall strategy. | (blank) |
| Test Marketing - Pros/Cons | new or improved product within a tightly defined->measure sales potential, bcs. National sales->expensive in product. costs, advert. expenditure and opportunity costs->firm may not want to take risk based on market res. | Pros: 1.better sales forecast ->right sized factory can be set up., 2.lessong to be learnt before national launch. Cons: 1.competitors can evaluate product & decide response, 2. managment & salesforce focus on small area->may cause higher sales than reali |
| Time series analysis | processing of data into sequences of figures over time.4 main elements: 1. Longer-term trend (->growth/decline) 2. Reg. seasonal of cyclical fact., 3. Erratics: unpred. figure fluctuations, 4. Responses: relust of specific measures taken to affect series | (-> advert. spending). To analyse data effectively necessary to process by: 1.smoothing out erratics/seasonal variations (adjustments), 3. ident./measuring responses->possible identifying underlying trend & then extrapolate to forecast future position. |
| Value analysis | study of each aspect of a product to see if it adds sufficient value to justify ist cost. Companies conduct value analysis to look at both new and existing products in terms of looks, costs, and how well it performs it's job. | Requires combination of market research, cost info and engineering skills |
| Confidence level | measurement of degree of certainity to be attached to a conclusion drawn from sample finding. (conclusions are only drawn from 95% findings-> 95% confidence level) | (blank) |
| Critical path analysis | (CPA) This is a way of showing how a lengthy and complex project (e.g. a building project) can be completed in the shortest possible time. | The project is broken down into a number of separate activities, and each activity is then placed in the correct sequence, so to minimise the duration of the project. |
| Expected value | is the average value of possible outcomes resulting from a decision, weighted by probabiliteis of achieving them. (-> used in dec. Tree analysis, it is the monetary value that would be expec ted on average from a decision if it was repeated many times | (blank) |
| Latest finish time | (LFT)date by which an activity on a network must be completed in order that following activities can be started in time to finish project asap. In order to calculate LFT you must: 1. Draw up network diagram, 2. Calculate EST from left to right, 3. Then wo | (blank) |
| Network analysis | '->Critical Path Analysis->way of showing how lengthy/complex project (->building project) can be complet. in shortest time->project is broken down into a no separate activities->each activity is placed in the correct sequence->minimising duration of proj | shows which activities are ‘critical’->Management effort/resources can be concentrated ensuring these activities are completed on schedule.Non-critical activities->degree of flexibility in amnt of time taken to complete them->ensures min waste/resources m |
| Normal distribution | a frequency distribution which is bell-shaped so that halt of the variables lie to the left of the mean etc. -> Symmetry of curve->mean, median, and mode all coincide at same value-> | (blank) |
| Probability | likelyhood of an event occuring expressed as a numerical value. Often in % form or as a fraction | (blank) |
| Stratified sampling | the consumers are grouped into segments again (or ‘strata’) based upon some previous knowledge of how the population is divided up. The number of people chosen to be interviewed from each ‘strata’ is proportional to the population as a whole. | (blank) |
| Cluster sampling | this normally involves the consumers being grouped into geographical groups (or ‘clusters’) and then a random sample being carried out within each location. | (blank) |
| Quota sampling | this method involves the consumers being grouped into segments which share certain characteristics (e.g. age or gender). The interviewers are then told to choose a certain number of respondents from each segment. | However, the numbers of people interviewed in each segment are not usually representative of the population as a whole. |
| Uncertainty | situation that underlies every business decision. Because decision making concerns changes that will have an effect in the future and future cannot be predicted with certainty. | -> Decisions that have an effect on distant future are subject to great uncertainty whereas decisions affecting next week are more certain. |
| Asporbtion costing | calculate unit costs of items AFTER allocating a proportion of estimated FIXED OCERHEADS(->each unit must absorb fare share of overheads), Pros: 1. prices are set after ALL costs have been considered, | Cons:2. thought about accurate method for allocating costs, Cons: 1. ignores problem that fixed costs per/u can only be estimated if demand/output is predicted, 2. undermined by imprecise methods of overhead allocation |
| The ‘acid-test’ ratio | => Quick Ratio ->(current assets-stock)/current liabilities->Not all assets can be turned into cash quickly or easily. Some - notably raw materials and other stocks - must first be turned into final product, then sold and the cash collected from debtors. | The Quick Ratio therefore adjusts the Current Ratio to eliminate all assets that are not already in cash (or "near-cash") form. Once again, a ratio of less than one would start to send out danger signals. |
| Asset turnover | Sales / Net Assets ->ability of firm to generate sales turnover from assets. ->if not they drain businesses->should generate high sales | (blank) |
| Contribution | total revenue - total variable costs = contribution Therefore contribution minus fixed costs equals profit.->amount each product or department contributes towards covering fixed overheads of business. All furthe | Contr. Pricing->successfull products are priced to make a large contribution -> less successfull products priced more competetively |
| Cost-based Pricing | 1. Mark up Pricing, 2. Cost-plus pricing, setting price on the basis of production costs rather than market conditions->only if little or no competition | (blank) |
| Cost Centres | department which specific costs can be allocated, Pros: 1. better team spirits in small, 2. each individual can make a difference, 3. separation leads to better decision making | (blank) |
| Creative Accounting | (part of Window dressing) , questionable accounting practices, | Pros: 1. BRAND accounting, 2. CAPITALISATION of interest, 3. aquisition accounting, 4. Off-balance sheet financing, 5. Window dressing |
| Creditor days | (trade creditors)/(average daily sales(at cost)) ->measurement of average no of days a company takes to pay its suppliers | Pros:1. cuppliers can build payment delay into their cash flow forecast, 2. suppliers can check if they are treated fairly, 3. banks and suplliers can check on financial health of business->slide to later payment may indicate cash flow problmes |
| ARR | (->Average Rate of Return) Calcualtion: 1. add up total forecasted net cashflow, 2. deduct capital outlay, 3. ->divide result by expected life, , 4. express as percentage of capital outlay. Cons: no import. timing of money received | Pros: 1. more useful than payback bcs. considers level of profit earned form an investment rather than simply the time taken to recover costs. 2. easier comparisons with other investments, Cons: 1. fails to diff. between early or continuo generate profit |
| Average Profit | total net profit before tax over the asset's lifetime | (blank) |
| NPV | Net Present Value takes into account the size of the cash inflows over the life of the equipment, but also makes adjustment for the timing of the money. A greater weighting (or importance) is given to the inflows of cash in the earlier y | A / (1 + r)"hoch"n->A=actual sum of money, r=discount factor, n=number of years |
| Other factors when appraising investment projects. | 1. qualititative factors (i.e. firms objectives, effects on employees, change working cond(practices), 2. external enviroment (a. state of ecoomy, b. pressure groups, c. level of techn. progress in industry, d. legislations (restr. use of materials) | 3. effects on the enviroment, 4. external costs (e.g. pollution ) which have effect on image of company, 5. amnt of finance that is AVAILABLE, 6. effects of borrowing on gearing ratio |
| Debtors Day Ratio | Financial Efficiency Ratio->(Debtors x 356) / (Sales turnover)->how long it takes to collect debts and shows poor debt-collecting system, or could be part of marketing strategy | the sooner, the better->can be used to boost day-to-day working-capital to pay bills etc. |
| Creditors Day Ratio | (Trade creditors + accruals) / (cost of sales + other purchases x 365) | A similar calculation to that for debtors, giving an insight into whether a business i taking full advantage of trade credit available to it. |
| Interest Cover Ratio | (Operating profit before interest ) / Interest->This measures the ability of the business to "service" its debt. Are profits sufficient to be able to pay interest and other finance costs? | (blank) |
| P/E Ratio | ->Shareholders Ratio->Earnings per share Ratio->(Market price per share) / ( Earnings per share)-> | 1. figure needs to be compared with other companies, the higher the better the expectations of firms future profitability->however share prices fluctuate frequently, thus comparisons can be difficult ->viewed in the context of a sector or market average t |
| EPS | ->Earnings per share->Shareholders Ratio->(profit after tax) / ( No of ordinary shares) ->measures the company’s potential dividends that it could pay to shareholders->However, it is most likely that some of the profit after tax will be kept in | the company for re-investment ->Clearly the shareholders would want as much of the profit after tax as possible to be payable to themselves.->an important ratio. EPS measures the overall profit generated for each share in existence over a particular perio |
| Some examples of decisions that all businesses need to make | - Where should we locate the business?, 2. What goods should we produce?, 3. price charge? 4. wages pay?, 5. What should we do if a supplier fails to deliver on time?, 6. which job agency to choose? | 7. which employee appraisal system?->is the basic task of all managers-> Businesses have to make decisions in order to achieve their objectives. |
| strategic decision | very high-risk and is likely to influence the overall long-term policy and direction of the business. As such, it is likely to be dealt with by senior management (e.g. what new products to develop). | (blank) |
| tactical decision | is a fairly routine, predictable, short-term decision, which is normally handled by middle management (e.g. what price to charge for products). | (blank) |
| There are eight key stages involved in the traditional decision-making process: | 1. Set objectives, 2. Gather data., 3. Analyse the data., 4. Make a decision, 5. Communicate, 6. Implement the decision, 7. Look at the results, 8. Evaluate the outcome. | there are many constraints: These constraints can be internal (such as the lack of available finance, or the lack of a multi-skilled workforce) and external (such as a rise in interest rates, a new competitor entering the market, or new legislation which |
| a decision node | Node A is represented as a square and it is called a decision node->i.e. at this node, the decision-maker can only choose one branch to follow | (blank) |
| a chance node | represented as a circle and is called a chance node (i.e. there are several possible outcomes from this node, one of which will definitely happen).-> Each event stemming from a chance node has a probability attached to it (these probabilities add up to 1) | (blank) |
| Decision tree advantages: | 1. They set out problems clearly and logically., 2. They show the likely amounts of money involved in the decision, and the probabilities of their occurrence, 3. Constructing a decision tree may show possible courses of action which had not been previousl | 4. They are tangible and therefore people can easily see the issue that they are faced with, rather than attempting to visualise somebody’s description. |
| Decision trees disadvantages | 1. probabilities are ESTIMATES, 2. They can only show quantitative data - they do not take account of peoples’ feelings, legal constraints, etc., 3. The results can be biased, | 4. There can be significant time delays whilst making the decision, and some of the data may be out-of-date by the time the decision is finally made. |
| Critical path | These are the activities that must be completed in as little time as possible, in order that the duration of the project can be minimised. The critical path can be found by identifying the activities that have no float time. | These activities must be closely supervised, since any delay will delay the completion of the project. |
| Critical path analysis | This is a way of showing how a lengthy and complex project (e.g. a building project) can be completed in the shortest possible time. | The project is broken down into a number of separate activities, and each activity is then placed in the correct sequence, so to minimise the duration of the project. |
| An activity | is that part of the project which requires time and resources - it is represented by an arrow, running from left to right. | (blank) |
| - A node | is the start or finish of an activity, and it is represented by a circle. Each diagram must start and end on a single node and no activity lines must cross each-other. | (blank) |
| Gantt chart | -> a horizontal BAR CHART->activities right order/time completed->is a visual display showing how tasks might be sequenced over time, -> very simple-> is part of scheduling | ->us constructed to assist resource allocation decisions and the control of pfojects. |
| Critical path Pros & Cons: | 1. useful management tool for large/complex projects, 2. helps reduce total time/resources needed, 3. identifies potential areas which could cause , 3. encourages forward planning, 4. control cash flow/efficiency (JIT) | Cons: 1. need to be followed strictly to work, 2. does not allow changes in ext. enviroment having detrimental effect , 4. does not give guarantee, 5. needs cooperation of staff, 6. not suitable for too complex proj., 7. rely on accurate data |
| cost centre | area of a business where costs stem from and can easily be recorded ->1. allow business allocate spending to deptms, 2. and if they generate enough profits with the money they spend | (blank) |
| profit centre | is an area of a business where revenue can be identified as being earned->generally include different product lines and retail outlets (used by large/diversified businesses) | (blank) |
| Cost Centres reasons: | 1. loss-making departments can easily be identified, 2. as each profit centre is viewed independently->can emprove motivation | Overall, the use of cost centres and profit centres allows a business to exercise a degree of financial control over its operations, and to monitor the efficiency and profitability of its various departments and product-lines. |
| Full Costing | attempt to allocate all costs incurred to cost centres->ensuring all costs are covered-> no losses due to underpricing->difficult to allocate certain overheads | (blank) |
| Marginal Costing | Contribution Costing->change in total cost of a product or service which results from changing output by one unit more->variable costs | (blank) |
| Contribution in decision making, Pros & Cons: | difference between sales revenue and variable costs of production->Pros: 1. give overview of entire business, 2. avoids need for arbitrary devision of fixed costs, 3. provides flexible basis for pricing decisions | Cons: 1. do not take market conditions into account, 2. some costs difficult to classify Fixed/variable, 3. fixed costs can change in the longer term->invalidating earlier decisions based on contribution |
| Cons of cost-based pricing | Cons: 1. little ref. to cons. wishes or flexibility, 2. inflexible in respons to market changes | (blank) |
| Contribution Pricing Pros | allows more flexibility that cost plus pricing | (blank) |
| Standard costing | costs which a business expects for part. activities if carried out efficiently, invloves calc. expected costs and comparing these with actual costs->variance->quickly identifies poor performance | (blank) |
| Limitations of Ratios | 1. need to be compared with other data, 2. previous years results->trend, competitors, sim. industries, 3. only consideres financial aspect of a business | 3. other elements: a. market, b. positopn in market, c. quality of workforce, d. economic enviroment, |
| Investment decision | 1. must be judgetd agains likely return, non-financial factors have to be considered, 1. less job-security for empl.,->damage performance, | dec. are based on: 1. costs/revenues, 2. accurate forecasts, 3. stable interest rates, 4. competitors, 5. tastes, 6. economy, 7. import prices |
| Investment Appraisal are used in: | 1. purchasing fixed assets, 2. investing in advertising, 3. expanding, 4. reorganisation/retraining, 5. using new techniques of prod ( JIT), | 6. R&D |
| ARR | Average rate of return ->This is an investment appraisal technique which calculates the average annual profit of an investment project, expressed as a percentage of the sum of money invested. | (blank) |
| Trade Unions | Aims: 1. improve pay, 2. improve work. conditions, 3. support training & prof development, 4. members interests are considered by employers | length of the working week, working conditions, and proposed redundancies |
| pay claim | reasons why higher wages are justified: 1. increase in cost of living (inflation), 2. increase in labour productivity->profit, 3. need to be able to recruit "the best", 4. if new machinery/working practises are introduces workers need to be compensated | for extra work |
| Industrial Action | If the negotiation process collapses there are a numer ind. actions how trade unions can prodeed: 1. Non co-operation. , 2. Work to Rule or ‘Go Slow’, 3. Overtime Ban, 4. Picketing, 5. ‘Blacking’, 6. Strikes | Whichever method of industrial action is implemented, the trade union and the employees are using it in an attempt to reduce output (therefore also reducing sales and profits) and hoping that the employer will give-in to their demands. |
| Non co-operation. | Refusing to attend meetings and use new machinery or processes, | (blank) |
| Overtime Ban | Refusing to work any hours over and above the required weekly number of hours. | (blank) |
| ‘Blacking’ | Refusing to deal with certain employees or suppliers because they have refused to participate in the industrial action. | (blank) |
| Strikes | This is often the last resort for a trade union. It involves the employees stopping their work, leaving the workplace and refusing to return. | (blank) |
| Employee Participation | This refers to employees being given more responsibilities at the workplace and being involved in the decision-making process. The aim of participation is to increase the levels of motivation and job satisfaction amongst the staff ->feel more involved | Main types: 1. Employee shareholders, 2. Empowerment, 3. Kaizen, 4. Quality circles, 5. Teamworking, 6. Works council, 7. Worker-directors. |
| Employee shareholders | This should motivate the employees to work harder and increase their efforts, since the share price will rise as the company becomes more profitable, therefore increasing the capital gain on their shares. | (blank) |
| Worker-directors. | These are workforce representatives who participate in the meetings held by the board of directors. Worker-directors are not very common in the UK, since employers often believe that they can slow down the decision-making process, as well as | ‘leaking’ confidential information to employees. |
| Works council. | This is a type of worker participation and it consists of regular discussions between managers and representatives of the workforce over such issues as how the business can improve its processes and procedures. | (blank) |
| A.C.A.S | Advisory Conciliation and Arbitration Service->set up by governement->to settle industrial disputes and claims of unfair dismissal by employees | can be invited into a business by the two feuding parties (employers and trade unions) in order to offer their advice to both parties on the industrial unrest and the ‘best’ way to proceed in order to settle the unrest |
| Arbitration | s the process of resolving an industrial dispute by using an independent person to decide the appropriate outcome. The arbitrator will look at the arguments put forward by both parties, and then he will arrive at a decision. | The decision can be legally binding on both parties if this was agreed prior to the arbitrator’s decision. |
| HRM law/legislations | 1. Employment Relation Bill (unfair dismissal), 2. The Employment Rights Act, 4. The Health & Safety at Work, 5. The National Minimum Wage, 6. The Equal Pay Act | 7. The Sex Discrimination Act, 8. The Race Relations Act, 9. The Disability Discrimination Act |
| 2. The Employment Rights Act | covering unfair dismissal, redundancy and maternity). | (blank) |
| The Health & Safety at Work Act | covering working conditions and the provision of safety equipment and hygiene). | (blank) |
| The Sex Discrimination Act | stating that it is illegal to discriminate against an employee, or an applicant for a job, on the grounds of their sex or their marital status). | (blank) |
| 9. The Disability Discrimination Act | (stating that it is illegal for a business with 20 or more employees to discriminate against an employee, or an applicant for a job, on the grounds of their disability). | (blank) |
| There are four main measures that a business can use in order to measure the effectiveness of its employees: | 1. Labour Turnover, 2. Absenteeism, 3. Labour Productivity, 4. Waste levels. | (blank) |
| Contract of Employment | which is a written statement covering the terms and the conditions of employment (e.g. date employment commences, job title, pay, hours of work, holiday and pension entitlements), as well as the process for disciplinary and grievance procedures. | (blank) |
| industrial tribunal | if an employee feels that they have been unfairly dismissed (e.g. on the grounds of pregnancy, ethnic background, or union membership), they can apply to have the case heard at an industrial tribunal | (blank) |
| Time series analysis | processing of data into sequences of figures over time.4 main elements: 1. Longer-term trend (->growth/decline) 2. Reg. seasonal of cyclical fact., 3. Erratics: unpred. figure fluctuations, 4. Responses: relust of specific measures taken to affect series | (-> advert. spending). To analyse data effectively necessary to process by: 1.smoothing out erratics/seasonal variations (adjustments), 4. ident./measuring responses->possible identifying underlying trend & then extrapolate to forecast future position. |
| Time based management | focusing on time as a key business resource. (1970's it was price, 1980's it was quality). Now speed of delivery, speed of response and speed of development are all-important, Speed adds value (i.e. price list of photo-processing outlet | (blank) |
| Test Marketing | new or improved product within a tightly defined->measure sales potential, bcs. National sales->expensive in product. costs, advert. expenditure and opportunity costs->firm may not want to take risk based on market res. Pros: 1.better sales forecast -> | ->right sized factory can be set up., 2.lessong to be learnt before national launch. Cons: 1.competitors can evaluate product & decide response, 2. managment & salesforce focus on small area->may cause higher sales than realistic nationally. |
| Sales Budget | target level of sales revenue for a period of time, usually 1 year. Budgets are set after adjusting the forecast sales figures in line with firms overall strategy. | (blank) |
| value analysis | study each aspect of product to see if its designed to satisfy needs in terms of looks/costs/performance->involves market research & engineering skills | identification of costs that can be cut (->cheaper materials/fewer components), Cons: 1. can reduce quality |
| how much/relevan info do Investment appraisal techniques provide? | 1. payback ignores value of money->incompetent on its own, 2. ARR ignores cash payback, =>NPV is needed in adition, 4. accuracy of forecasts?, 5. expected return needs to be compared with costs of capital, 5. add. info needed | i.e. market cond, 6. non-financial arguments: consumer satisfaction/quality |
| Evaluate Critical Path as a appropriate decision-making technique. | 1. used as planning/controlling technique, 2. indicates "best" way to do project, 3. implies possible delays, 4. cld be used when planning promotion, 5. cld improve productive & time-based efficiency | 6. cld introduce JIT , 7. stock control, 8. no guarantee, 9. rely on outside factors (suppliers etc.) |
| Analyse value of Accounting statements when judging on the performance of a company. | 1. provide objective/numerical/financial judgement, 2. compare like with like when comparing with past accounts, 3. snapshot, 4. window dressing, 5. price/other changes might not be reflected, 6. non-financ. info such as quality of workforce, | 7. don't show risk profile, 8. size/market share cannot be seen, 9. usage of differend accounting prodeedures makes comparison difficult, 9. past figures |
| Analyse possible reasons for variances | 1. variances identify differences between actual and budgeted sales, 2. which cld be due to poor advertising/promotion, 3. more sales/but lower average unit costs may be due to lower price->generating more sales, 4. fewer sales/higher unit price cld be | due to price raise->affecting competitvness/sales volume, 5. figures are based on assumptions, 6. actual sales may be different ->variances, 7. seasonal effects which might not have been taken into account by the budget. |
| Assess the extent to which sales budgets may help directors in their decision making | 1. sales budgets establish how many/much a firm expects to sell, 2. used to assess level or production/making, how many raw materials/labour are needed and other resources (fixed assets/cash) are needed, 4. used to plan production/purchases, to control | and to motivate (setting targets, e.g. sales), 5. setting sales budget can be difficutl esp. in new market/competetive, 6. may differ(adverse)->demotivating, 7. assist in dec. making->act as targets, 8. differences/variances can be studied and acted upon |
| Analyse appropriatness of sales forecasting to predict a firms performance (e.g. sales) | 1. forecasting involves predicting future sales using statistical/qualitative methods, 2. in competetive market they help planing/compete, 3. include primary/secondary methods, 4. incl extrapolation/use of published statistics/moving average/time series/ | & qualitative methods such as consumer panels and delphi technique, 5. ->possibly few past records, 6. if national market use of governement statistics->historical/different, 8. seasonal->time series to identify trends etc.- 9. fashion, 10. sampling theor |
| Evaluate the use of absorption costing as methods used to assist in setting selling prices for clothes ranges | 1. allocates direct costs and apportions overheads to calculate a full product cost, 2. clothes have direct costs, eg material, and indirect costs, eg admin which can be allocated to find costs, 3. differend figures depending on how overheads are apportio | 4. this arbitrary apportionment of overheads means that any pricing decisions based on absorption costing/cost-plus methods must be suspect/limited value, 5. some clothes much higer overheads->means high"cost-plus" prices are set |
| Evaluate the use of marginal costing as mehtods which can be used to assist in setting selling prices for clothes range. | 1. based on cost behavior /split fixed and variable costs->calc. contribution each product makes towards total fixed costs, 2. contribution pricing is therefore relevant, 3. different prod->diff. contributions to fixed costs | 3. pricing decisions using contribution avoid arbitraty apportionement of overheads, 5. products generating greater proportion of overheads->sales price may well be set lower using marginal costing |
| Compare Absorption costing and Marginal costing in context of clothes range | 1. there will be a form of price discrimination bcs. of different markets for diff ranges, 2. both approaches ignore market-based info->either on its own is limited, 3. if exclusive->cost plus pricing, 4. if if marginal costing level of mark-up must | consider market conditions, 5. if more mass-market->cost plus pricing on its own is not suitable (competition), 6. bcs. firm might be price-taker-Ycompetetive pricing |
| Issues Gantt chart can raise when planning to open a new shop | 1. gantt charts are used to hepl to control projects showing sequences of events and resources requirements, 2. shows events/resources associated with opening new shop, 3. issue of accuracy->ie. timing, 4. issue of critical path/timing-> | arrange leashold, fit shop, train staff appear critical whereas other activities migh have float |
| Analyse the extent to which Critical Path Analysis is an appropriate decision making technique for directors when introducing new clothes range | 1. CPA shows how a project can be completed in the shortest time, 2. planning/control technique, 3. allows to work out implications of any delays, 4. CPA cld be used in production type situations (eg construction of new clothes range), | 4. CPA does not guarantee effective decision making, 5. only how they SHOULD happen, no guarantee availability of resources, 5. other relevent decision making techniques may be needed |
| Assess the influence of relevant areas of employment law when recruiting and selecting staff to work in new shop | 1. equality/racial/disability, 2. equal pay, 3. firm needs to be aware of EU legislation, 4. incl. Race Relations Act/Sex Discrimination etc. , 4. contract of employment will be needed, 5. safe working enviroment, 6. althoug DDA may not apply(staff no), | access to shop needs to be considered, 5. health & safety issues, 6. which apply during recruiting , 7. laws influence advertising, interviews and appointment of staff, 8. affect cost/procedures, eg. more admin/HR staff, 9. illegal cost goodwill good name |
| Analysis and Decision making should include | 1. Sales Forecasting as an aid, 2. Probability & Decision making techniques, 3. Cost analysis and decision making, 5. Ratio Analysis, 6. Investment appraisal | (blank) |
| Analyse extent to which results of analysis give the directors all info needed to make a decision | 1. profitability/liquidity/efficiency can be analysed, 2. limited due to "snapshot", 3. historic, 4. other ratios needed as indicators (ie. quick asset, turnover, debtors days etc), 4. other factos (ie. exchange rate), 5. false comparisong due tue | different market segments (family/business), 5. flawed/incomplete, 6. other quantitative/qualitative info needed (eg, apparent move into different market segment) |
| Assess extent to which DCF technique should influence the decision to invest money in upgrading facilities. | 1. DCF considers all cash flows and adjusts those occuring in future yrs to present value->time value of money, 2. can be used if projected cash flow exist and appropriate discount rates, 3. if return above 10&->proceed, 4. based on ASSUMPTIONS | ie. cost of capital stays unhanged, 5. FORECASTS, 6. need other factors->ie. ARR, Payback etc. , 7. qualitative factors->effect on image->effect on market segment etc. |
| Evaluate usefulness of decision tree analysis as an appropriate method for directors when deciding wheter to rent of buy equipment., | 1. DT provided logical basis, based on assessment of probabilities, 2. prob of success/failure can be assessed, 3. as well as "do nothing", 4. assigning probab. /establishing financial costs and returns is difficult, 4. depends on past experience (sim. si | on which prob/prediction can be based, 5. risk of using unsuitable data, 7. data may be manip. by directors in favour of one , 7. DT plays PART, forcing to quantify outcomes, 9. DT are better for tactical decisions (NOT strategic), 10. do NOT cons. nature |
| Assess the importance of sales forecasting to a business | 1. if recenetly established->accurate sales forecasting needed, 2. forecasting should reflect different types of cust., 2. seasonal effects, 3. other factors->past sales/economic enviroment/market research/advert. budget/comp/changing tastes/pricing polic | product life cycle/stock issues, 4. time series allows deseasonalisation->overall trend, 5. exptrapolation, 6. cld consider using qualitative methods/panel surveys/delphy method |
| Assess value of decision trees to analysi business problems | 1. encourage adopting quantitative approach to business dec. 2. allows objective comparisons (num. data), 3. suitable for tactical dec., 4. ignores unpredictability of enviroment, | 5. diff to quantify risks and expected values, 7. |
| Assess effects of employment law on small businesses recruitment and selection of an assistant manager for example | 1. individuals/equality opportunity issues->racial, sexual, disability, equal pay, 2. apply various stages of recr./select (indl appointment), 3. non-appl. of DDA due to staff No, 5. minimum wage issues->unlike due to senior position, 6. health & safety | issues for small firms apply during recruitment, 7. contract of employment requirements following selection even for small firms |
| Analyse "other" factors directors will need to consider when making decisions whether to drop a certain "model". | 1. how cld spare capacity/labour be used more profitabily/laid off/retraining/value of machinery, 2. actions/reactions of competitors, 3. actions/reactions of commercial clients and domestic customers | (blank) |
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