Business Game

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Business Game

  1. 1. Decision Making Game
  2. 2. Fantastic Cleaning Co. 15 Employees - AED 8/hour (Maximum 40 hours a week) Option1 Option2 (Rent Machines) (without Machines)Cost per cleaning Service (2 Hours)Direct Materials AED2 AED 12Direct Labor = 8 AED/hour X 2 Hours AED 16 AED 16Variable OH AED 2 AED 3Variable Selling Cost AED 5 AED 9Monthly Fixed Cost AED 10,000 AED 10,000Machine Rent Cost AED 15,000 AED 0Selling Price AED 70 AED 70Variable Cost AED 25 AED 40Contribution Margin AED 45 AED 30
  3. 3. Option1 (Rent Cleaning Machines)Direct Materials = AED 2 Selling Price = AED 70Direct Labor = 8 AED/hour X 2 Hours = AED 16 Variable Cost = AED 25Variable OH = AED 2 Contribution Margin = AED 45Selling Cost = AED 5Fixed Cost = AED 10,000Machine Rent Cost = AED 15,000/ month Breakeven (Profit Required = AED 20,000) Sales = VC + FC + Required Profit 70 X Cleaning Services = 25 X Cleaning Services + 25,000 + 20,000 45 X Cleaning Services = 45,000 Cleaning Services = 1000
  4. 4. Option2 (without Cleaning Machines)Direct Materials = AED 12 Selling Price = AED 70Direct Labor = 8 AED/hour X 2 Hours = AED 16 Variable Cost = AED 40Variable OH = AED 3 Contribution Margin = AED 30Selling Cost = AED 9Fixed Cost = AED 10,000Machine Rent Cost = 0 Breakeven (Profit Required = AED 20,000) Sales = VC + FC + Required Profit 70 X Cleaning Services = 40 X Cleaning Services + 10,000 + 20,000 30 X Cleaning Services = 30,000 Cleaning Services = 1000
  5. 5. Option1 (Rent Cleaning Machines) Option2 (without Cleaning Machines)Direct Materials = AED 2 Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16 Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2 Variable OH = AED 3Selling Cost = AED 5 Selling Cost = AED 9Fixed Cost = AED 10,000 Fixed Cost = AED 10,000Machine Rent Cost = AED 15,000/ month Machine Rent Cost = AED 0Breakeven - Cleaning Services = 1000 Breakeven - Cleaning Services = 1000
  6. 6. + AED 11,000 Month2: # of Cleaning Services =Option1 (Rent Cleaning Machines) Option2 (without Cleaning Machines)Direct Materials = AED 2 Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16 Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2 Variable OH = AED 3Selling Cost = AED 5 Selling Cost = AED 9Monthly Fixed Cost = AED 10,000 Monthly Fixed Cost = AED 10,000Machine Rent Cost = AED 15,000/ month Machine Rent Cost = AED 0Selling Price = AED 70 Selling Price = AED 70Variable Cost = AED 25 Variable Cost = AED 40Contribution Margin = AED 45 Contribution Margin = AED 30Profit = (45 X 800) – 25,000 = AED 11,000 Profit = (30 X 800) – 10,000 = AED 14,000
  7. 7. + AED 11,000 + AED 31,250 Month2: # of Cleaning Services =Option1 (Rent Cleaning Machines) Option2 (without Cleaning Machines)Direct Materials = AED 2 Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16 Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2 Variable OH = AED 3Selling Cost = AED 5 Selling Cost = AED 9Monthly Fixed Cost = AED 10,000 Monthly Fixed Cost = AED 10,000Machine Rent Cost = AED 15,000/ month Machine Rent Cost = AED 0Selling Price = AED 70 Selling Price = AED 70Variable Cost = AED 25 Variable Cost = AED 40Contribution Margin = AED 45 Contribution Margin = AED 30Profit = (45 X 1250) – 25,000 = AED 31,250 Profit = (30 X 1250) – 10,000 = AED 27,500
  8. 8. + AED 11,000 + AED 31,250 + AED 1,400 .comOption1 (Rent Machines) Option2 (without Machines)Direct Materials = AED 2 Direct Materials = AED 12Direct Labor = AED 16 Direct Labor = AED 16Variable OH = AED 2 Variable OH = AED 3Selling Cost = AED 5 Selling Cost = AED 9Selling Price = AED 70 Selling Price = AED 70Variable Cost = AED 25 Variable Cost = AED 40Contribution Margin = AED 45 Contribution Margin = AED 30Commission Rate (25%) Commission Rate (25%)Minimum Price = Minimum Price =Price 38 = Profit (1,200 to 1,400) Price 38 = LossPrice 43 = Profit (1,100 to 1,600) Price 43 = Profit (600 - 1,000)Price 46 = Profit (800 to 1800) Price 46 = Profit (400 – 1400)
  9. 9. + AED 11,000 + AED 31,250 + AED 1,400 .comOption1 (Rent Machines) Option2 (without Machines)Direct Materials = AED 2 Direct Materials = AED 12Direct Labor = AED 16 Direct Labor = AED 16Variable OH = AED 2 Variable OH = AED 3Selling Cost = AED 5 Selling Cost = AED 9Selling Price = AED 70 Selling Price = AED 70Variable Cost = AED 25 Variable Cost = AED 40Contribution Margin = AED 45 Contribution Margin = AED 30Commission Rate (25%) Commission Rate (25%)Minimum Price = Minimum Price =Price 38 = Profit 1,300 Price 38 = LossPrice 43 = Profit 1,400 Price 43 = Profit 900Price 46 = Profit 900 Price 46 = Profit 1,300
  10. 10. + AED 11,000 + AED 31,250 + AED 1,400 + 800 Direct Materials Saving for Bulk order AED 1500 OtherFantastic CleaningCleaning Co. Company
  11. 11. + AED 11,000 + AED 31,250 + AED 1,400 + 800 +? Advertising Strategy Other Cleaning Company AED 5,500 AED 6,250 Fantastic Cleaning Co. AED 6,500 AED 5,250
  12. 12. + AED 11,000 + AED 31,250 + AED 1,400 + 800 +? Fantastic Cleaning Co. Total Profit =
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