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Business simulation

Business simulation

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Business simulation

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  1. Year 11 Economics Business simulation

  2. The government has imposed new health and saftey laws. The cost of safety training will be $30,000. You estimate this reduce stoppages and increase output by 5% Do you Introduce the training Do nothing and risk a fine Situation 1

  3. Option one • Add $30,000 to your staff training costs • Increase output by 500 units • Option two • An inspector arrives and fines you $10,000 • Add $30,000 to training costs • Increase output by 500 units Outcome

  4. Your production manager wants to break up the task of making the skis into several smaller jobs and retrain the staff. Training costs will be $15,000 but output should increase by 20% and raw materials cost increases by $20,000 Do you Introduce the change Do nothing Situation 2

  5. Option one • Increase output by 2000 units • Increase training costs by $15,000 • Increase raw materials cost by $20,000 • Option two • No changes Outcome

  6. You are considering installing sprinklers and improving fire safety. This will cost $12,000. You estimate the risk of fire is <2% Do you Install sprinklers Do nothing Situation 3

  7. Option one • Add $12,000 to other costs • Option two • There is no fire but your insurance company is not happy and increases your insurance premium by $10,000 Outcome

  8. Due to the removal of import barriers the local market is flooded by cheap skis from overseas. You consider increasing advertising which will cost $60,000 Do you Advertise Not advertise Situation 4

  9. Option one • Increase advertising costs by $60,000 • Option two • The flood of cheap imports forces you to cut your price to $145 Outcome

  10. Your factory staff are demanding a 10% pay rise or they will strike. If they do strike your annual output will fall by 10% from last year. Do you Accept the pay rise Ignore the threat Situation 5

  11. Option one • Increase wage costs by $15,000 • Option two • The strike does not work and they return to work. However output falls by 1000 units Outcome

  12. Your molding machine is getting old and causing an estimated 5% reduction in output. A new machine will increase output by 200 units but will cost $25,000 a year to lease. It will also effect the cost of raw materials Do you Lease the machine Keep using the old machine Situation 6

  13. Option one • Increase output by 200 units • Increase lease costs machinery by $25,000 • Increase raw materials cost by $4,000 • Option two • Reduce output by 500 • It keeps breaking down so increase other costs by $5,000 Outcome

  14. You want to buy the warehouse next door so you can earn money from leasing it out. The lease income is $90,000 per year. You will need to borrow $500,000 and 8% interest Do you Buy the warehouse Not buy the warehouse Situation 7

  15. Option one • Increase other revenue by $90,000 • Increase interest payments by $40,000 • Option two • No changes Outcome

  16. You want to expand your business by taking over a rival ski maker who has closed. This will increase wages costs by $100,000, rent $20,000, freight by $10,000, machinery by $10,000, raw materials by $120,000, power by $2,000, staff training by $5,000 but will also increase sales by 10,000 and help you compete with the increasing imports of skis from overseas. Do you Expand Not expand Situation 8

  17. Option one • Rent up by $20,000 / Lease machinery up $10,000 / Wages up $100,000 / Raw materials up $120,000 / Freight up $10,000 / Staff training up $5,000 / Power up $5,000 / Output up 1,000 • However increased supply from overseas pushes the price down to $130 • Option two • Increase supply pushes the price down to $130 Outcome