FINANCIAL ACCOUNTING
JANE’S JEWELLERY
PART A:
Calculation: 1mt = £400
100cm = 1mt = 400
20cm = 400×0.2 = 80
1 stone=1.25g
500g/1.25 = 400 stones
400 stone = £1200
1 stone = 1200/400 = £3
1 stone = £3.
Contribution=selling price – variable cost
Variable cost = £132
Contribution = 132 × 25/100 = 33
33 = selling price – 132
33 + 132 = selling price
Selling price = £165
Fixed cost: £
Rent 2500
Cutting silver 60
Shaping of stone 80
Table & presentation 55
Promotion cost 250
Specialist carrying case 125
£3070
Variable cost: £
Silver 80
Stone = (3×10) 30
Cost of time 20
Present box 2
Variable cost £132
Contribution /unit £33
Selling price/necklace £165
a) BEP = total fixed cost
= 3070 / 33 = 93 units
Contribution/unit
b) Margin of safety =
Actual no. of units sold – BEP
175 – 93 = 82 units
c) No of units sold = total contribution
Contribution/unit
Total contribution = total fixed cost + profit
3070 + 3000 = 6070
No of units sold = 6070/33 = 184 units
PART B:
Telephone rent: 3×4 = 12
40×4 =160
Broadband: 15×12=180
Silver £80 increases 20%
80 × 20/100 = 16
80 × 0.2 =16
80 + 16 =£96
Stone £30 increases 10%
30 × 10/100 =3
30 × 0.1 = 3
30 + 3 =£33
Contribution/unit:selling price -variable cost
183 – 153.9 = £29.10
Fixed cost:
Online rent 1500
Broadband 180
Telephone rent 160
1840
Variable cost:
Online transaction 1.50
Cost of time charge 20
Silver 96
Present box 2
Stone 33
Actual postage charge 1.40
Total variable cost 153.9
Selling price 180
Postal charge 3
Actual selling price 183
d) BEP = total fixed cost
= 1840/29.10 = 63.23
Contribution/unit
e) No of units = total contribution
unit contribution
Total outcome = total fixed cost + profit
1840 + 5000 = 6840
No of units = 6840
= 235 units
29.10
MethodsJane can use to build and improve her business and factors she should apply.
1) Penny-Pinching Promotions:through friends by creating more publicity to them, they would advertise your goods to people that needs them. In this way your contact would be spread out which in turn increases your potentials of your business. A customer that is satisfied with your products would tell people both in formal and informal discussions. Advertising is all about perception. this is one of the major things she has to paste in the hearts of her clients
2) Time your payments:she should find out from her supplies if there’s discount for early payment, if they do then early payment is advisable but if the reverse is the case then paying at as when due is fine, so as to get more interest from the bank. Example like booking and paying for trains in advance is very cheaper. Secondly she should make sure the supplier supply’s her with quality materials and at a competitive price with prompt and efficient delivery.
3) How to Target Other Markets:she could go the extra mile by marketing for students and working professionals with little modifying. Another concept is by retailing to wholesalers who in turn sell and makes profits which makes creates room for more sales output and in flow of cash. Secondly understanding the existing market so as to create a new market, and also constant evaluation.
4) Franchising and Licensing:after a second thought expanding her business might be capital intensive, you have to recruit and get location. But applying the above is another way of getting an existing company do the work for her because she gets returns with little risk.
5) Customer relationship: she should try to build her own brand. This is a major way 2 gain an edge among others because they are the reason you are in business. Her website should be customer friendly in its offer because customer’s taste increases so it should be attractive with consistent innovations, the cost should not be looked at here because you tend to gain much. She should involve her customers in process flow in order to improve their satisfaction. She should try to meet the challenges of true professionalism meaning that she should apply a customer oriented system that uses truthful and non manipulative method that aims to quench the need of both the customer and her. she should consider branding and attractive logos in her marketing strategies because this helps in establishing a business identity
FACTORS TO CONSIDER
PROMOTING HER WEBSITE AS A MAJOR SELLING INSTRUMENT TOOL:
since she has decided to use the internet as a way of selling, she must know that web developers are not marketers, so advertising on the web is not a guarantee of sales because most web users spend maybe five seconds which means she’s has five seconds to captivate the web user and keep them on her site. She should make sure the first message on her home page is not just on her business but on the wants of the online user. Her website is a massive revenue generator, so it has to be put right.
CONSISTENCY WITH HER CUSTOMERS:
This is a major strategy she has to consider because to start advertising for new clients would always cost her more while already existing clients is low or probably cost nothing with the use of internet and mails. Another advantage here is finding out from clients what they need and make it for them, that is an advantage on an existing customer, and it increases your profits without much work.
SELLING AT HIGH PRICE:
This might be considered as not too good, but it’s a fast way of raising profits because a major part of the clients buy things on price while the minority does the same, reason is that the cheaper the price might mean the product might not last longer but if the price is expensive their would be the guarantee that it’s good, even when you sell the good products at cheaper price. example virgin trains is expensive but faster so a lot of people tend to travel by them while shops like PRIMARK sells quantity rather than quality so individuals with high taste would not go for shopping there rather they would go to shops like Harrods.