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R(x)=FC+VC(x)+PBT PAT=PBT-CT CT=PBTxCTR/100 PBT=PAT/(1-CTR)
Purchasingcycle:Requisition (type and number of items needed) Value Analysis (lowest cost way to satisfy the request) Supplier Selection (prices, delivery times, quality, etc.) Order Placement (formal purchase order) Order Monitoring (scheduling) Order Delivery (transportation, quality control, payment)
Production planning: Routing (movement of mechanical part or other piece of work from one operation to the next)Loading (how long it takes to perform a particular operation) Scheduling (when an operation is to be performed at a machine) Dispatching (preparing and issuing of work orders) Follow-up (keeping track of work completed) Corrective Action (scheduling overtime, shifting work to other machines, etc.) Re-planning (in response to changing market conditions, manufacturing methods, labour force, etc.)
Inventory systems: periodic 1– ideal, automatic system, frame contact with the supplier, abnormal situations:overstocking or stock out. Periodic 2 –stock taking is needed before the order, stock out sit. Perpetual–continuous (perpetual) stock-taking is needed, stock-out In lead time
Pricing:Comparison: the price of a product allows the buyer to estimate its value, or worth, relative to other products. Stimulation: price acts as a signal which tells producers whether they should produce more goods, and consumers whether they should buy more goods. Rationing: who purchases each particular good is determined by the price of good, the income of the buyer,
and expected utility of the purchase.
Mark up: buying price/1-markup=price Break even: FC/Price-VC=units top break even. Backward: Price-VC=contribution margin-FC=profit Skimming: high quality, the newest in the market,price elasticity is low, difficult to copy the product, so the competitors can enter just later on, conusmers are snob, Price skimming involves setting a high price before other competitors come into the market. (Competitors would like to enter the market because of the high profit, but could not due to technological advantage, legal protection, e.g. patent, high investment needs, etc.). Penetration:price elasticity is high, low price high demand, easy to copy, no imagination in consumer that low price means low quality, The aim of penetration pricing is usually to increase market share of a product and to discourage competitor to enter the market (competitors do not want to enter the market because of the low profit).
Production budget: Sales(pcs)+Planned Ending Inv. Of Finished Goods-Beginning Inventory of Finished Goods= Units to be produced
Purchasing budget: Quantity to be Produced(pcs)+ Planned Ending Inventory of Raw Material- Beginning Inventory of Raw Material= Units to be Purchased
Cash Budget: Beginning Cash Balance + Receipts (collections)= Cash available for disbursements – Disbursements: Payment of Invoice, Wages, Other general cost expend. Surplus (shortage)– Min. desired cash balance= Cash available for investment (needed)± Financing (borrowings/repayments etc.) =Ending Cash Balance
Margin of safety in units=Actual Units -Break Even units, Margin of Safety in Units or doll./ Actual Sales in Units or doll.
SBE:Advantages: the owner is the boss, she/he enjoys taking, risks and making decisions, she/he has the profit, generally doesn’t need big investment, easy to establish, quick responds for changing environment.
Disadvantages: low capital, no or expensive credit, the responsibility of running a sbe cannot given to someone else
SME:1. Set objectives Initial objective: must make money.What others? 2. Evaluate the Market Market research (failure possibility!!!) 3. Determine the Cost of Required Assets necessary operating assets
4. Analyse Personnel Requirements How many people? Part-time or permanent? Costs!Training, promotion of employees 5. Prepare a Pro Forma Income Statement General outlineCompare with the profit objectives (Step 1.)
6. Choose the Right Legal Form Which form is the best? _ partnership,_ sole entrepreneurship,
_ corporation. 7. Raise the Needed Capital 8. Pick a Good Location It is very important especially for retailers. 9. Prepare the Accounting System Hiring an accountant to set up proper bookkeeping procedures. (profit, taxes) 10. Draw Up the Marketing Plan _ Formulating a marketing strategy to reach the market. _ Pricing strategy (skimming pricing, penetrating pricing) 11. Obtain the Needed Permits Certification, tax number, etc. 12. Begin the Business and Match Objectives with Performance Change the objectives if necessary.