We see a lot of examples in the press stating that shops are being closed, or various products terminated because they are unprofitable. Before any such action is taken we need to be clear what we mean about being unprofitable. We need to examine and question the figures that are offered to support this decision. This is a simple example where most will automatically choose to terminate product Y, or branch Y.
If you are not involved in a manufacturing environment, you may be tempted to ignore this blog on the grounds that make or buy decisions will be irrelevant to you. Nothing could be further from the truth! This we will demonstrate in the next section, which is concerned with the evaluation of providing internal services against the use of outside contractors, and represents a good illustration of an application of make or buy principles.
In this example we will first produce a budgeted Income Statement (without the special order); We will then construct a total Income Statement (including the special order); Finally, we will produce an Income Statement - showing incremental income and costs for a special order
One issue likely to be appropriate to all managers at some time in their careers is whether to accept what we will refer to as a special order. By this we mean, 'Are there circumstances in which it might make sense in financial terms to sell products or services at a lower price than normal, or alternatively, to provide a service internally at less than its full cost?'
In some production and distribution decisions, management may be confronted with the question of how best to allocate the firm’s limited resources. Where demand for the product is greater than the production or distribution capabilities available, a company should seek to maximise its total contribution margin from these limited resources.
This is a fully worked example with comments. It covers the calculation of break-even, minimum selling price and volume required at a fixed selling price. It concludes with the construction of a break-even chart.
There are many examples of organisations using competitive tendering in an attempt to obtain savings in the services they provide. These include, local authorities with refuse collection; health authorities with domestic, catering and building maintenance services; and the Royal Navy with ship repair.
This show 3 different yet simple images created using glow brushes. It really helps show how powerful and effective brush sets are in GIMP. None of these images took more than 5 minutes to create and most of that time was taken experimenting with different size of brush.
For this blog I will describe a ratio model developed by Robertson in 1983. It is a model that has stood the test of time since the ratios included are those that best measure overall changes in financial health
This blog will introduce five employee ratios and provide comments on each one. I will then attach a table that will show the results using data taken from the Polly Ester case study and conclude by giving an interpretation of each ratio.
This blog will introduce five working capital ratios and provide comments on each one. I will then attach a table that will show the results using data taken from the Polly Ester case study and conclude by giving an interpretation of each ratio.
I will introduce four profitability ratios and provide comments on each one. I will then attach a table that will show the results using data taken from the Polly Ester case study and conclude by giving an interpretation of each ratio.
This blog will use data taken from the Polly Ester case study. The common size statement takes data from the income statement and the balance sheet and calculates movements from a starting (base) year. It does help to provide useful information that can be used when carrying out an analysis of the financial position of a company.
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