IGCSE & A LEVELS GUIDE

Chapter 19.1 - Business Finance: Needs and Sources Learning Objective: Sources of Finance (19.1) Businesses need financing... It's obvious. Every business needs financing. Businesses need startup capital: This is the capital needed by an entrepreneur when starting a business. Businesses need finance to purchase so called non-current (a.k.a. fixed) assets: These are long-term assets (>12 months) such as buildings, machines, technology, and vehicles. Such investments are called

1. Calculate the total direct labor costs for: a. Pump production b. Fan production 2. Calculate the unit cost of producing each product based on the full-costing approach. 1. Calculate the unit contribution of each product. 2. If annual output is all sold, calculate the total contribution of each product. 3. Calculate the profit/loss made by each product using full costing at the current output level. 4. Calculate the impact on the total profit of the business if production

Chapter 18 - Location Decisions Lesson Objective: To understand the difficulties in internationalizing operations There are so many factors influencing location and relocation decisions, most of which are related to costs, sales, and logistics: Cost of site; Size of site (opportunity for expansion); Labor costs and availability; Transportation costs (delivery of goods and access to supplies); Market potential; Government incentives; Legal restrictions; Quality of local infras

Chapter 18 - Location Decisions Lesson Objective: To understand how businesses pick their location Location is one of the most important decisions for a business. Full stop! The right or wrong location decision can either positively or negatively impact: Costs; Sales; Delivery of products and services. Location is a long-term decision! What do YOU think are the most important factors to consider when making a location-decision? There are many things to take into considerat

Chapter 17 - Achieving Quality Production Lesson Objective: To understand how quality control and assurance work Case study (p. 231) Test yourself (p. 231) There are mainly two approaches for achieving quality: Control is based on inspection/checking of the completed unit Assurance is the process of self-checking quality by the workers in charge of each process preventing and reducing faulty products. Control , therefore, can be problematic: Workers and inspectors live in

Chapter 17 - Achieving Quality Production Lesson Objective: To understand the importance of quality for businesses In your opinion, what is a quality product? The most reliable? The best performing? The longer lasting? Quality is a relative concept which depends on variables such as: Price; Customers' expectations; Customers' satisfaction. Quality , therefore, is about being defect-free and meeting customers' expectations . The concept of Quality Standard comes after under

Chapter 16 - Costs, Scale of Production, and Break-Even Analysis Lesson Objective: To understand how to construct and interpret the break-even analysis The break-even point is the point in which the cost and revenue are equal and there is neither profit nor loss being made by the business: In other words, the break even point happens when all revenues earned by the firm with sales is equals to the firm's costs of production. When you are at break even and want to make profit

Chapter 16 - Costs, Scale of Production, and Break-Even Analysis Lesson Objective: To understand how economies of scale come to happen Economies of Scale : when the unit average cost decreases as the output increases: Economies of Scale can be of many types: Financial Economies of Scale: the larger a business becomes the lower its costs of borrowing and therefore higher profits. Managerial Economies of Scale happen when the large business is able to employ better, more spec

Chapter 16 - Costs, Scale of Production, and Break-Even Analysis Lesson Objective: To understand and to be able to differentiate among the many different types of costs Costs, costs, costs... They come in many forms, sizes, and tastes: Fixed costs; Variable costs; Total costs; Average costs. Let's first look in to fixed and variable costs: Activity 16.1 (p. 216) And then we have our total costs , which obviously is the sum of variable + fixed costs: Activity 16.2 (p.

Chapter 15 - Production of Goods and Services Lesson Objective: To understand the three main methods of production I am sure you now understand everything about inventories, JIT, and Kaizen. It's time to go further on Operations Management and explore the different methods of production: The simplest method of production a business can have is job production : This is when each i ndividual item is completed before the next product starts production (e.g. a tailor making custo

Chapter 15 - Production of Goods and Services Lesson Objective: Costs of inventory; lean production methods Businesses hold different types of inventory: Raw Materials and Components - inventories of the needed inputs for the production process; Work-in-Progress - partially finished goods that have not yet gone through the entire production process; Finished Goods - goods that are ready to be sold and send out to customers. Imagine having to hold all these different types o

Chapter 32 - Budgets Lesson Objective: To understand how to perform variance analysis It is obvious: budgets are controlling tools : At the end of every budget period there needs to be an assessment comparing the company's aims and the actual performance . This process is called budgetary control . Any differences found between the aims and the actual performance are to be investigated . This is called variance analysis and it's an important part of budgeting for several re

Chapter 15 - Production of Goods and Services Lesson Objective: To understand the difference between production and productivity Throughout the next couple of blog posts we will discuss operations management, more specifically, production : The question remains: What is production? Production is the process of converting inputs (what is inputs?) such as land, labour, and capital into sealable outputs/goods (e.g. shoes). There is one department of business that is responsibl

Chapter 14 - Marketing Strategy Lesson Objective: To understand the different methods for entering international markets As a part of Marketing Strategy businesses sometimes pursue International Markets . On this regard we need to understand: Opportunities and problems of entering foreign markets; Trade barriers; The different ways to overcome the challenges of entering a foreign market. Business' efforts to enter international markets are various: ecommerce, exporting, setti

Chapter 32 - Budgets Lesson Objective: To understand what are budgets and its different methods Budgeting is a key financial process in any company. Budgeting is a detailed financial plan for a future time period taking into account the financial needs and the consequences of the plan . Both, costs and profit centers usually have 12-month budgets that are broken down by month. The main benefit of a budget is that it allows to assess the performance of each part of the o

Chapter 14 - Marketing Strategy Lesson Objective: To understand what is marketing strategy and be introduced to some legal controls over business activity You should be a pro on the 4 most important Marketing Decisions by now: All these decisions , as you know, are inter-connected and part of something called the Marketing Strategy. The importance of these 4 decisions is not necessarily equal in every situation. A Marketing Strategy is a plan prepared by the Marketing Depart

Now that you understand how the product life-cycle works as well as the different extension strategies, let's see how the product life-cycle influences the 4P's (Marketing Mix) decisions: Product Life-Cycle and PRODUCT Decisions: - On the introduction stage , companies tend to present an introductory product to the market (base mode); - On the growth stage, companies make adjustments to the base mode according to the market feedback; - On the maturity stage , companies start

Chapter 13 - Marketing Mix, Place and Promotion Lesson Objective: To understand the benefits and limitations of the various promotional methods You know that Promotion is focused on informing and convincing customers to ultimately improve sales . But how exactly does it do it? There are various methods of promotion companies can make use of : 1. Advertising : The simple use of medias (e.g. TV, social media, direct email, leaflets, billboards) to communicate with customers.

Chapter 32 - Costs Lesson Objective: To understand the difference between full-costing and contribution costing Let's get started with the two costing techniques we are up to discuss by looking at: 1. Full Costing Technique (Absorption Costing) : a technique in which all fixed and variable costs are allocated to products, services, or divisions of the business On this technique the total overheads is divided between each product and cost centers on the proportion of total di

Chapter 32 - Costs Lesson Objective: To understand the basic concepts of costs before learning costing techniques What are the reasons cost data/information is so important for businesses? Why should managers have accurate cost data? Cost data is important for various reasons: Costs aid on pricing decisions ; Costs are also important for production decisions: Whether to stop the production of a product; Whether to increase production ; Whether to implement new methods; Wheth