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Business Mock P2
Business Mock P2
a.i) Fixed costs are costs that do not vary with the number of output
produced.Examples of fixed costs are monthly rental paid for
accommodation,or salary paid to an employee. Fixed cost is a
component that is used to find the total cost.
b.ii) CE’s allocation of fixed costs would not be equal as production line
A and B have different target customers, different prices of eggs and
different variable costs. CE would be allocating a higher fixed cost for
production line B compared to production line A as there is a $3.10
difference in price.
c) Value added is the difference between the price of product or service and
the cost of producing it. It can be considered as an extra special feature added
by a company or producer to increase the value of a product or service.
Therefore, value addition could help enhance a company’s brand image, and
doing so may result in higher sales.
Employees might be affected as they might have to transfer to the new factory
or work at a location that is located far away from their houses. They may be
concerned about their salary, whether or not they would be offered a raise if
their workload increases. Employees may also face a change in their jobs as
they may have to perform different tasks than they are normally assigned
while the ne emp;oyyess are trained. Furthermore, existing employees may
have to increase their skills if the expansion leads to them having to specialise
in a task that they are not well experienced in. For example, an employee who
usually delivers eggs might have to assist with packaging eggs.
a.ii) The maturity stage of the product life cycle shows that sales will
eventually peak and then slow down. During this stage, sales growth has
started to slow down, and the product has already gained recognition
and generated sales for the business.
b.ii) A decreasing working capital would mean FF has a negative cash
flow, meaning its current assets are less than its liabilities. This may
mean that FF is likely to have difficulty paying back its creditors and may
have serious financial trouble, such as the business becoming illiquid.
Moreover, FF would not be able to continue trading or pay its day-to-day
expenses, as suppliers would be less likely to sell to FF on credit if the
business is unable to pay back on time and is already in debt.
Job production ensures that customers’ exact needs are met as each
flower arrangement would be made by taking their exact wants into
account. Customers may be more likely to pay a higher price for special
flower arrangements that are customised to their requirements, rather
than mass produced flowers. This could help FF reach out to a larger
customer base and provide their flower arrangements for different
occasions to new customers. This could also act as the brand’s USP as
these flowers could give FF a competitive advantage against rival firms.