Fixed costs Variable costs Rent Monthly loan interest payment Gas & Electric (combined “Duel Fuel” bill paid by monthly direct debitBusiness rates paid by monthly direct debit Water rates paid by monthly direct debitAnnual Gas boiler service costInsurance premiums e.g. buildings & contents insuranceRegular monthly fixed price advert in local free newspaper Annual listing fee for Yellow pagesWeekly newspaper/magazine bill for salon customers waiting area.Wages of salon cleaner Window cleaner Telephone bill Salon products for hairdressing services e.g. shampoo, styling products, colours etc.Salon staff wages (trained and casual staff)Number of units produced and soldFixed costs Variable costs Total costs Total revenue Profit/Loss0£10,0000£10,0000(10,000)500£10,000£4,500£14,500£7,500(7000)1000£10,000£9,000£19,000£15,000(4000)1500£10,000£13,500£23,000£22,500(500)2000£10,000£18,000£28,000£30,000£2000+
(iii) By looking at the market research it seems to show that from the forecast the sales figures are at 1800 manicures per annum. This means that the units of production and sales is 1800- 17000= 100. As well as this the sales revenue is £28500-£26000=£2500
(C)
The reason why it is important to estimate the breakeven point for the business is so that Emma and John are able to forecast the cost and sales so that they can see whether or not they have a chance of making profit. It is important to estimate the breakeven point as a form of decision making because it helps the management in determining how much number of units must be produced and sales to earn enough so that it can cover the cost of production and so it leaves the salon at no profit and no loss point.
The importance of margin of safety helps the management to estimate how much of their estimated sales can be decreased to achieve some kind of profit from the production and sales or how much costs can increase so that the business can survive if they ever experienced a loss position . In addition, if the sales of levels increase beyond the breakeven point the hairdressing salon would have a chance of making a profit. The business may then be able employ more staff as well as to expand the salon.
It is important for businesses to control the costs within their organisation because without it there is not much of a chance of them making a near profit. Therefore, you need to assure that the breakeven point has been fully controlled so that the business can survive in order to pay outstanding bills etc.
A description of budgets and budgeting
If a business wants to succeed and have a future it is important that they fund their plans. Moreover, budgeting is an effective way of controlling cash flow and allowing business owners to invest in new opportunities. If a business is growing the budgets may need to be split up into different areas such as marketing, production, sales etc. Money tends to move in many directions through the business. This is why budgets are important so that you can ensure that the expenditure will be controlled.
Planning- this makes a difference to the growth of the business because it will allow you to focus the resources on improving the profits and reducing the costs.
The benefits of business planning help to allow a person to focus on the right direction of the business and it also provides targets that will help the company grow. As well as this it will give business owners an opportunity to review the performance. Business planning helps by-:

P4

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to P4

Similar to P4 (20)

More from GucciAJJA

More from GucciAJJA (8)

P4