Question 2 - A Team Publications

A Team publication produces books for publication to the adult market. Books are old for £20 each The cost per book is £1 for paper and binding and £0.50 for printing and £0.50 for authors royalties. Salaries amount to £50 000 per year whilst scheduled maintenance is £10000. Advertising is budgeted and fixed at £20 000 per year with other fixed costs amounting to £20 000 per year. The cost accountant is interested in the breakdown of costs and revenues at 5000 unit intervals.


Level of Output 
Total Revenues 
Fixed Costs 
Variable Costs 
Total Costs 
Profit /Loss

5000 
 
 
 
 


10000 
 
 
 
 


15000 
 
 
 
 


20000 
 
 
 
 


25000 
 
 
 
 


30000 
 
 
 
 


35000 
 
 
 
 


40000 
 
 
 
 



Questions


1. Complete the above table (10 marks)


2. A Team Publications wants to make a target profit of £25000. If costs remained unchanged, examine the impact. (7 marks)


3. Assess the accuracy and usefulness of the above cost information. (8 marks)

Question 2 - A Team Publications

A Team publication produces books for publication to the adult market. Books are old for £20 each The cost per book is £1 for paper and binding and £0.50 for printing and £0.50 for authors royalties. Salaries amount to £50 000 per year whilst scheduled maintenance is £10000. Advertising is budgeted and fixed at £20 000 per year with other fixed costs amounting to £20 000 per year. The cost accountant is interested in the breakdown of costs and revenues at 5000 unit intervals.


Level of Output 
Total Revenues 
Fixed Costs 
Variable Costs 
Total Costs 
Profit /Loss

5000 
 
 
 
 


10000 
 
 
 
 


15000 
 
 
 
 


20000 
 
 
 
 


25000 
 
 
 
 


30000 
 
 
 
 


35000 
 
 
 
 


40000 
 
 
 
 



Questions


1. Complete the above table (10 marks)


2. A Team Publications wants to make a target profit of £25000. If costs remained unchanged, examine the impact. (7 marks)


3. Assess the accuracy and usefulness of the above cost information. (8 marks)

Question 1 - The Nostalgic Lamp Company

The Nostalgic Lamp Company manufactures three types of lamp: Mr T., Gloria Gaynor and Donny Osmond models. Production of the lamps are organised into three costs centres. The profit and loss account for the year just ended shows that the Donny Osmond makes a loss and it has been suggested that they may be discontinued.


£000s 
Mr T 
Gloria Gaynor 
Donny Osmond

Sales 
500 
350 
650

Direct Materials 
150 
80 
250

Direct Labour 
100 
100 
250

Variable overheads 
50 
40 
60

Fixed overheads 
100 
80 
110

Totals costs 
400 
300 
670

Profit/loss 
100 
50 
(20)


Questions

1. Define the term ‘cost centre.’ (2 marks)

2. What are the pros and cons of using costs centres in dealing with costs? (4 marks)

3. From the above schedule of costs and profits:- 

a) Calculate the variable cost of producing the each of the three lamps (3 marks)

b) Calculate the contribution of each of the three lamps (3 marks)


c) Calculate the total fixed costs (1 mark)

d) Calculate the overall level of profits. (2 marks)


4. The Donny Osmond lamp is discontinued. Evaluate the impact on the company’s overall profits.

Price elasticity of demand

Firstly, I explain to you what does Elasticity of demand mean. Price elasticity of demand is how many people consumes and change price.

Secondly,  i will tell you about calculate PED. It is `Percentage change in quantity demanded divided by the percentage change in price`.

I explain to you understanding values for price elasticity of demand.

1 If Ped = 0 it's mean that it is perficly inelastic.

2If Ped > 1 it's mean that it is elastic.

3 If Ped > ~ it's mean that it is infinity.  

Externalities

Market failure is an economic inefficiency where allocative and productive efficiency are not achieved.

Productive efficiency is using all resources.

Allocative-full satifaction of consumer.

Externalities-affect to the third parties. There are two types of externalities.

1 Negative

2 Possitive

Examples of negative extarnalities:

1 Productive. One factor produce something. It effects on environment so it is negative externalities.

2 Allocative. For example, if I buy ciggarates I will achieve my satisfaction but it will affect to a person who is staying next to me.

Private cost+external cost=social cost

Examples of positive externalities. If I buy an aftershave lotion it will be really good smell and for example my girlfriend will like it. So it's positive extarnality.

Private benefit + External benefit = Social benefit

Production possibilities, opportunity cost

In microeconomics, production is the conversion of inputs into outputs. It is an economic process that uses resources to create a commodity that is suitable for exchange. This can include manufacturing, storing, shipping, and packaging. Some economists define production broadly as all economic activity other than consumption. They see every commercial activity other than the final purchase as some form of production. 

Credit Crunch

What does Credit crunch mean?
Credit crunch is a sudden reduction in the general availability of
loans (or credit), or a sudden increase in the cost of obtaining loans
from banks. (wikipedia)
The events that led to the credit crunch took place in 2007. The main
reason for the credit crunch is the collapse of housing market.
Also known as a`house bubble`. Firstly, house prices in the USA were
really high. It was profitable for banks because when people borrow money
from banks and can not give it back banks could sell their houses.
Too many houses were built and prices went down. So banks
couldn't cover their losses and that affected financial market and the
whole economy.

Consumer surplus and producer surplus

Consumer surplus is the surplus ubility or satifaction received by consumer.
Production surplus is the surplus reward by the producer.
If indirect tax is put on the product. This will reduce both producer and consumer surplus as shown below.

Production possibility curve

Let me tell you what the production possibility curve can be used to show. A is unemployed resources. X is outside the production possibility curve and so there are not enough resources. B D and C are on the production possibility curve and so there is maximum efficiency. The two efficiencies are production and allocative efficiency

Today's lesson

Bibi was talking about `finite economics resources/factors of production of land, labour, capital, and enterprise`.

1. Capital
2. Land
3. Labour
4. Enterpreneurship

Capital is a form of physical resource covering anything that can be regarded as a man made aid for production.

Land is a natural resource. It includes a wide range of things such as mineral deposits like oil.

Labour is the human resource that is available in any economy.

Entrepreneurship is a very particular form of human capital.

I can't remember everything I'm writing about labour. Some day was that chimpanzees were working like labour.