mice and men
Costs and budgets
Types of costs
Fixed
Fixed costs do not change in the business e.g. expenses, bills, rent etc. fixed costs are costs that do not change, nevertheless of the number of goods that are sold. These costs include insurance, salaries, and insurance. Weather they make 100 or 1000 products these costs must be paid.
Variable
Variable costs do change in the business. Variable costs are costs that do change but depends to the output. E.g. Frankie’s furniture producing chairs will have variable requirements for amounts of wood, leather, depending on how many chairs they produce.
Breakeven
Frankie’s furniture could use the calculations that they make fixed costs, variable costs and sales to work out the point is known as breakeven and shows how many products they need to produce and sell. The point is known as breakeven and shows how many products they need to produce and sell.
Breakeven is calculated as
Breakeven = fixed costs Selling price – VC per unit
Shows
The margin of safety MOS can also be calculated to allow Frankie’s furniture to work out the units by which sales can fall before Frankie’s furniture start to loss profit.
Calculating breakeven even allows Frankie’s furniture to work out how many products they need to sell before they can make profit o the products
Point where sales meet costs
Shows how many products they need to produce and sell
Monitoring budgets 2 ways of budgeting
Zero budgeting is a difficult process because it seeks to give a guide to how much Frankie furniture thinks it will spend in a given area in the furniture. Sometime Frankie furniture will choose zero budgeting. Mangers may give money based a=on what is need for they financial year. This is when Frankie’s furniture are given no budget and unfortunately have to ash their manager for the money based on what they believe and what they will need for the year.
Allocated budgeting is the opposite and this is
Types of costs
Fixed
Fixed costs do not change in the business e.g. expenses, bills, rent etc. fixed costs are costs that do not change, nevertheless of the number of goods that are sold. These costs include insurance, salaries, and insurance. Weather they make 100 or 1000 products these costs must be paid.
Variable
Variable costs do change in the business. Variable costs are costs that do change but depends to the output. E.g. Frankie’s furniture producing chairs will have variable requirements for amounts of wood, leather, depending on how many chairs they produce.
Breakeven
Frankie’s furniture could use the calculations that they make fixed costs, variable costs and sales to work out the point is known as breakeven and shows how many products they need to produce and sell. The point is known as breakeven and shows how many products they need to produce and sell.
Breakeven is calculated as
Breakeven = fixed costs Selling price – VC per unit
Shows
The margin of safety MOS can also be calculated to allow Frankie’s furniture to work out the units by which sales can fall before Frankie’s furniture start to loss profit.
Calculating breakeven even allows Frankie’s furniture to work out how many products they need to sell before they can make profit o the products
Point where sales meet costs
Shows how many products they need to produce and sell
Monitoring budgets 2 ways of budgeting
Zero budgeting is a difficult process because it seeks to give a guide to how much Frankie furniture thinks it will spend in a given area in the furniture. Sometime Frankie furniture will choose zero budgeting. Mangers may give money based a=on what is need for they financial year. This is when Frankie’s furniture are given no budget and unfortunately have to ash their manager for the money based on what they believe and what they will need for the year.
Allocated budgeting is the opposite and this is