a) Fixed costs –Fixed costs are costs that constantly need to be paid by the business even if the business isn’t operating currently. For example this can be rent. Variable costs –Variable costs is costs that changes depending the amount of the level of output or sales by the business.
b) Costs need to be controlled because this can cause damage to the business if not controlled, the business could exceed their budget generating a negative balance creating no money for hair salon. Also the hair salon needs to monitor their budget knowing that their budget always has to be more than costs unless they want to go out of service.
c) Break-even point –This is fixed costs divided by unit contribution (the unit contribution is the selling price minus the variable cost per unit). This shows how many products a business needs to produce or sell, along with what services need to be offered, to display the point where they’re neither making a profit or loss. Total revenue equals total cost. Contribution –This is how much money each item is sold for bringing in towards help for paying off fixed costs of a business. d)
Profit or Loss
e) Break-even can be used in the planning and monitoring process for new and existing businesses by locating potential problems within the business. This aids a new business by displaying levels of output it will have to sell to achieve a profit. Also if accurate records of transactions are kept it is possible to control effectively the cash coming in and out of the business.
f) The purpose of budgeting is to aid a business by monitoring its performance along with helping make decisions and used as a forecast of income and expenditure. Budgeting can be also used for resolving conflicts of interest between groups with an organisation, communicate the wishes and aspiration of senior management, motivating individuals to achieve performance levels that are agreed and set and planning the use of resources.
Headliners use a sales forecast for seeing how much they’re going to bring in sales and how much they’re going to spend, they can forecast their profit as a result. Month
g) A zero based budget is method of budgeting hat looks back frequently on how the business is performing. A business like headliners may do a budget for a year but every three months they will reviews their budget performance. If the performance of the budget is not good they will go back and change it, also at the beginning of every year they will start their budge at a fresh based on their performance from the previous year.
An Allocated budget is when apportion of money is divided according to how many departments and people are working within a business. This budget is usually set at the start of the financial year and a business must ensure each month that it is sticking to its prediction.
h) Variance analysis measures the difference between what is budgeted and the actual costs or sales revenue that has been received. This is of key importance for a business because it can inform a business early enough for the business to make changes to get themselves back on track. i) “Bidding to increase future resources” Sometimes a business may not realise that they’re very low on money within their budget, so low that they cannot...
Please join StudyMode to read the full document