IB Business Management SL 3.3 Costs and Revenues Topic Practice

Suparman Fish ( SF )
Gepa Suparman owns and operates four fishing boats in Indonesia. There is a growing demand for canned (tinned) food, including cans of fish. Gepa wants to enter the secondary sector by opening a small factory producing cans of fish.
Gepa's business will be called Suparman Fish ( S F ) and will be a private limited company. Gepa will own all of the shares. The factory will be located in a village three miles from the harbour. Because unemployment is high in the village, Gepa should easily find workers for the new factory. In addition to the manager's salary, workers' wages, and the cost of fish, supplies, and cans, S F will have the semi-variable cost of electricity.
Gepa has prepared a four-month cash-flow forecast based on the following information:
- opening balance month 1: $\$15000$.
- month 1 : sales revenue of $\$1000,$increasing by 20 % per month.
- manager's salary: $\$300$per month.
- workers' wages: $\$175$per worker per month.

- variable costs (fish, supplies, and cans) are equal to 40 % of sales revenue.
- semi-variable cost of electricity: fixed cost of $\$100$per month, plus a variable cost of $\$0.10$ per kilowatt hour (kwh). Month 1 usage: 100 kwh , increasing by 10 % each month.

Although S F would create several jobs in the village, many residents are not happy about the new factory. The new factory would use chemicals, which cause pollution. Residents are concerned about the unpleasant smells from the factory. A representative from the local employment office is concerned whether Gepa's factory will provide a safe working environment.

Explain why electricity is a semi-variable cost for S F.

HSM Bakery Ltd. (HSM)

HSM Bakery Ltd. (HSM), a privately held company, produces baked goods (bread, cakes, and cookies), which are sold to shops.

In recent years, HSM has broadened its target market by producing a range of gluten-free cakes.

Using Figure 3 and Figure 4, comment on the change in HSM's sales revenue from 2023 to 2024.

Martin and Susan were internal stakeholders with a conflict over Martin’s appointment, Susan’s resentment, her task-oriented and increasingly autocratic management, and Martin’s laissez-faire style, empowerment and delegation. The Imperial’s fixed costs could include the salaries of hotel staff, fixed electricity or internet charges, local property taxes and contracted promotional costs; under Option 2, fixed costs and variable cleaning and maintenance costs would be lower because apartments would be serviced weekly rather than rooms daily. Martin considered three Ansoff choices: Option 1 would renovate and relaunch the existing hotel for similar customers, Option 2 would transform rooms into apartments for business travellers, and Option 3 would form a strategic alliance with KenSafar to reach package-tour customers. Empowerment could give employees authority, responsibility and autonomy, increasing job satisfaction and motivation and encouraging better productivity. Susan was efficient, hard-working and committed but bureaucratic, formal, cold and autocratic; Martin was warm, friendly and laissez-faire, allowing supervisors to resolve problems. Martin’s leadership could support empowerment, while Susan’s task focus could protect housekeeping standards but damage morale.

Identify two fixed costs for The Imperial.