30 Questions
What is the primary consideration for an entrepreneur when selecting manpower?
Educational qualifications and experience of workers
What is the primary characteristic of materials in production?
They form part of the finished product
What is a key factor to consider when selecting manufacturing equipment?
The cost of the equipment
What is the term for the process of transforming raw materials into finished products?
Method
What is dependent on the product to be produced and mode of production?
Selection of method
What is an entity that offers goods and services to another business?
Product Description
What is the main goal of value chain analysis?
To make or support a competitive benefit
What is a supplier in the context of a business?
A business partner of the business
What is the purpose of a business model?
To describe how an organization creates, delivers, and captures value
What is a supply chain?
A structure of organizations, people, activities, data, and resources involved in moving a product or service
What is the purpose of a business plan?
To explain what a product is and why it’s worth buying
What is drop shipping in the context of suppliers?
When a supplier ships goods directly to the customers of the buyer
What is the primary factor that determines revenue in a business?
Sales exceeding the cost of production
What is the term used to record revenues earned from rendering services?
Service Income
What is the formula to calculate the Selling Price of a product?
Cost + Mark Up
What is the term used to refer to the amount of merchandise or goods sold by a business in a given period of time?
Cost of Goods Sold
What is the purpose of knowing the number of products sold daily by competitors?
To benchmark the business's sales performance
What is the result of multiplying the projected daily revenue by 365 days?
Projected yearly revenue
What is the result of adding the beginning inventory to the Net Amount of Purchases?
Cost of goods available for sale
What does 'Merchandise Inventory, beginning' refer to?
Goods and merchandise at the beginning of the operation or accounting period
What is the purpose of calculating the gross profit margin?
To determine the profit that the business realizes from the sale of the product
What is included in the 'Cost' of a product?
The total outlay required in producing the product
What is 'Freight-in'?
The amount paid to transport goods from the supplier to the buyer
What is the purpose of calculating the Cost of goods available for sale?
To determine the amount of goods available for sale during the period
What is the operating profit margin a measure of?
The percentage of profit available after deducting cost of sales and operating expenses
What is the correct formula for the quick ratio?
(Current assets – Inventories) / Current liabilities
What is the net profit margin?
The third level of revenue in the income statement
What is the relationship between the operating profit margin and the business?
A higher operating profit margin is favorable to the business
What is the purpose of the operating profit margin?
To measure the percentage of profit available after deducting cost of sales and operating expenses
What is the relationship between inventories and the quick ratio?
Inventories are excluded from the calculation of the quick ratio
Study Notes
Module 6: Production Factors
- Manpower refers to the human labor force involved in manufacturing products, measured as the most critical and primary factor of production.
- Key manpower criteria include educational qualifications, experience, employment status, number of workers required, skills, and expertise.
- Material includes raw materials necessary for production, with considerations such as cost, quality, availability, supplier credibility, and waste.
- Machine refers to manufacturing equipment used in production, with factors to consider being product type, production system, equipment cost, capacity, spare parts availability, efficiency, and required skills.
- Method encompasses the process of transforming raw materials into finished products, dependent on product type, production mode, equipment, and required skills.
Value Chain and Supply Chain
- Value chain refers to the activities that add value to an item, aiming to create a competitive advantage.
- Supply chain involves organizations, people, activities, data, and resources in moving a product or service from supplier to customer.
- Business model describes how an organization creates, delivers, and captures value in various contexts.
Module 7: Revenue and Forecasting
- Revenue results when sales exceed production costs.
- Factors affecting revenue forecasting include economic condition, competitors, community changes, and internal business aspects.
- Plant capacity, raw material availability, labor, and salespersons are crucial in revenue forecasting.
Pricing and Revenue Calculation
- Mark Up Price = (Cost x desired mark up percentage)
- Selling Price = Cost + Mark Up
- Projected Yearly Revenue = Projected daily revenue x 365 days
- Projected Monthly Revenue = Projected daily revenue x 30 days
Cost of Goods Sold and Merchandise Inventory
- Cost of Goods Sold (COGS) refers to the amount of merchandise sold in a given period.
- COGS is computed by adding beginning inventory to net purchases, then subtracting ending merchandise inventory.
- Freight-in refers to the cost of transporting goods from supplier to buyer.
Module 8: Gross Profit and Profit Margin
- Gross Profit = Net Sales - Cost of Sales
- Gross Profit Margin = (Gross Profit / Net Sales) x 100
- Operating Profit Margin = Gross Profit - Operating Expenses
- Net Profit Margin = Operating Profit - Income Tax and Interest Expense
Liquidity Ratios
- Current Ratio = Current Assets / Current Liabilities
- Quick Ratio = (Current Assets - Inventories) / Current Liabilities
Learn about the importance of manpower and materials in production. Understand how to evaluate manpower criteria such as educational qualifications and skills, and how materials form part of the finished product.
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