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relations (HL only)">2.6 Industrial/employee relations (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25125/glossary-industrialemployee-relations.html" title="Glossary: Industrial/employee relations">Glossary: Industrial/employee relations</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21670/unit-3.html" title="Unit 3">Unit 3</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21744/31-sources-of-finance.html" title="3.1 Sources of finance">3.1 Sources of finance</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24501/glossary-sources-of-finance.html" title="Glossary: Sources of finance">Glossary: Sources of finance</a></li></ul><li class=" 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href="../22093/glossary-break-even-analysis.html" title="Glossary: Break-even analysis">Glossary: Break-even analysis</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21747/34-final-accounts.html" title="3.4 Final accounts">3.4 Final accounts</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31367/glossary-final-accounts.html" title="Glossary: Final accounts">Glossary: Final accounts</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21748/35-profitability-and-liquidity-ratio-analysis.html" title="3.5 Profitability and liquidity ratio analysis">3.5 Profitability and liquidity ratio analysis</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25111/glossary-profitability-and-liquidity-ratio-analysis.html" title="Glossary: Profitability and liquidity ratio analysis">Glossary: Profitability and liquidity ratio analysis</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21749/36-efficiency-ratio-analysis-hl-only.html" title="3.6 Efficiency ratio analysis (HL only)">3.6 Efficiency ratio analysis (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25114/glossary-efficiency-ratios.html" title="Glossary: Efficiency ratios">Glossary: Efficiency ratios</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21750/37-cash-flow.html" title="3.7 Cash flow">3.7 Cash flow</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25118/cash-flow-forecasts.html" title="Cash flow forecasts">Cash flow forecasts</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31376/glossary-cash-flow.html" title="Glossary: Cash flow">Glossary: Cash flow</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21751/38-investment-appraisal.html" title="3.8 Investment appraisal">3.8 Investment appraisal</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31377/glossary-investment-appraisal-.html" title="Glossary: Investment appraisal ">Glossary: Investment appraisal </a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21752/39-budgets-hl-only.html" title="3.9 Budgets (HL only)">3.9 Budgets (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31378/39-budgets-hl-only-glossary.html" title="3.9 Budgets (HL Only) Glossary">3.9 Budgets (HL Only) Glossary</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21684/unit-4.html" title="Unit 4">Unit 4</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21767/41-the-role-of-marketing.html" title="4.1 The role of marketing">4.1 The role of marketing</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25618/glossary-the-role-of-marketing.html" title="Glossary: The role of marketing">Glossary: The role of marketing</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21768/42-marketing-planning.html" title="4.2 Marketing planning">4.2 Marketing planning</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../28328/glossary-marketing-planning.html" title="Glossary: Marketing planning">Glossary: Marketing planning</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21769/43-sales-forecasting-hl-only.html" title="4.3 Sales forecasting (HL only)">4.3 Sales forecasting (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25713/glossary-sales-forecasting.html" title="Glossary: Sales forecasting">Glossary: Sales forecasting</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21713/44-market-research.html" title="4.4 Market research">4.4 Market research</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25208/glossary-market-research.html" title="Glossary: Market research">Glossary: Market research</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21770/45-the-four-ps.html" title="4.5 The four Ps">4.5 The four Ps</a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Product">Product</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../22627/glossary-product.html" title="Glossary: Product">Glossary: Product</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22525/price.html" title="Price">Price</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../22548/glossary-price.html" title="Glossary: Price">Glossary: Price</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22567/promotion.html" title="Promotion">Promotion</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../22704/45-promotion-glossary.html" title="4.5 Promotion - Glossary">4.5 Promotion - Glossary</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22745/place.html" title="Place">Place</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../23813/45-place-glossary.html" title="4.5 Place - Glossary">4.5 Place - Glossary</a></li></ul></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21774/46-the-extended-marketing-mix-7-ps-hl.html" title="4.6 The extended marketing mix (7 Ps) (HL)">4.6 The extended marketing mix (7 Ps) (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../23814/glossary-the-extended-marketing-mix-hl.html" title="Glossary: The extended marketing mix (HL)">Glossary: The extended marketing mix (HL)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21772/47-international-marketing-hl-only.html" title="4.7 International marketing (HL only)">4.7 International marketing (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../23815/glossary-international-marketing-hl.html" title="Glossary: International Marketing (HL)">Glossary: International Marketing (HL)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21773/48-e-commerce.html" title="4.8 E-commerce">4.8 E-commerce</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../23797/glossary-e-commerce.html" title="Glossary: E-commerce">Glossary: E-commerce</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21688/unit-5.html" title="Unit 5">Unit 5</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21937/51-the-role-of-operations-management.html" title="5.1 The role of operations management">5.1 The role of operations management</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24843/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21938/52-production-methods.html" title="5.2 Production methods">5.2 Production methods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24848/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21939/53-lean-production-quality-management-hl.html" title="5.3 Lean production & quality management (HL)">5.3 Lean production & quality management (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24839/glossary-lean-production-and-quality-management.html" title="Glossary: Lean Production and quality management">Glossary: Lean Production and quality management</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21700/54-location.html" title="5.4 Location">5.4 Location</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24959/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21695/55-production-planning-hl.html" title="5.5 Production planning (HL)">5.5 Production planning (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25032/glossary-production-planning.html" title="Glossary: Production planning">Glossary: Production planning</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../33222/56-research-development-hl.html" title="5.6 Research & development (HL)">5.6 Research & development (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../34014/glossary-research-development.html" title="Glossary: Research & Development">Glossary: Research & Development</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21941/57-crisis-management-contingency-planning-hl.html" title="5.7 Crisis management & contingency planning (HL)">5.7 Crisis management & contingency planning (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25042/glossary.html" title="Glossary">Glossary</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../25115/cuegis.html" title="CUEGIS">CUEGIS</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="The 6 CUEGIS concepts">The 6 CUEGIS concepts</a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Ethics">Ethics</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../21954/mcdonalds-supersize-me.html" title="McDonald's - Supersize Me">McDonald's - Supersize Me</a></li></ul></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="The CUEGIS essay">The CUEGIS essay</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22876/planning-your-cuegis-essay.html" title="Planning your CUEGIS essay">Planning your CUEGIS essay</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../33806/paper-2-section-c-questions.html" title="Paper 2 Section C Questions">Paper 2 Section C Questions</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../33959/the-ia.html" title="The IA">The IA</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="HL IA">HL IA</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22190/35-sample-research-questions-for-the-hl-ia.html" title="35 sample research questions for the HL IA">35 sample research questions for the HL IA</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22200/hl-ia-student-checklist.html" title="HL IA - Student Checklist">HL IA - Student Checklist</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../33508/ia-hl-poster.html" title="IA HL Poster">IA HL Poster</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="SL IA">SL IA</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22146/sl-ia-20-sample-titles.html" title="SL IA - 20 Sample Titles">SL IA - 20 Sample Titles</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38181/faq-about-the-sl-ia.html" title="FAQ about the SL IA">FAQ about the SL IA</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../22114/exams.html" title="Exams">Exams</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22115/command-terms.html" title="Command Terms">Command Terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36599/glossary-of-key-terms.html" title="Glossary of key terms">Glossary of key terms</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38059/flashcards-revision.html" title="Flashcards - Revision">Flashcards - Revision</a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38060/flashcards-revision-unit-1.html" title="Flashcards - Revision (Unit 1)">Flashcards - Revision (Unit 1)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38056/unit-11-revision-flashcards.html" title="Unit 1.1 Revision Flashcards">Unit 1.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38061/unit-12-revision-flashcards.html" title="Unit 1.2 Revision Flashcards">Unit 1.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38067/unit-13-revision-flashcards.html" title="Unit 1.3 Revision Flashcards">Unit 1.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38092/unit-14-revision-flashcards.html" title="Unit 1.4 Revision Flashcards">Unit 1.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38096/unit-15-revision-flashcards.html" title="Unit 1.5 Revision Flashcards">Unit 1.5 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38102/unit-16-revision-flashcards.html" title="Unit 1.6 Revision Flashcards">Unit 1.6 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38103/unit-17-revision-flashcards.html" title="Unit 1.7 Revision Flashcards">Unit 1.7 Revision Flashcards</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38114/flashcards-revision-unit-2.html" title="Flashcards - Revision (Unit 2)">Flashcards - Revision (Unit 2)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38121/unit-21-revision-flashcards.html" title="Unit 2.1 Revision Flashcards">Unit 2.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38125/unit-22-revision-flashcards.html" title="Unit 2.2 Revision Flashcards">Unit 2.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38126/unit-23-revision-flashcards.html" title="Unit 2.3 Revision Flashcards">Unit 2.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38144/unit-24-revision-flashcards.html" title="Unit 2.4 Revision Flashcards">Unit 2.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38146/unit-25-revision-flashcards.html" title="Unit 2.5 Revision Flashcards">Unit 2.5 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38147/unit-26-revision-flashcards-hl-only.html" title="Unit 2.6 Revision Flashcards (HL only)">Unit 2.6 Revision Flashcards (HL only)</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38149/flashcards-revision-unit-3.html" title="Flashcards - Revision (Unit 3)">Flashcards - Revision (Unit 3)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38153/unit-31-revision-flashcards.html" title="Unit 3.1 Revision Flashcards">Unit 3.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38154/unit-32-revision-flashcards.html" title="Unit 3.2 Revision Flashcards">Unit 3.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38182/unit-33-revision-flashcards.html" title="Unit 3.3 Revision Flashcards">Unit 3.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38183/unit-34-revision-flashcards.html" title="Unit 3.4 Revision Flashcards">Unit 3.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38191/unit-35-revision-flashcards.html" title="Unit 3.5 Revision Flashcards">Unit 3.5 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38192/unit-36-revision-flashcards-hl.html" title="Unit 3.6 Revision Flashcards (HL)">Unit 3.6 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38193/unit-37-revision-flashcards.html" title="Unit 3.7 Revision Flashcards">Unit 3.7 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38194/unit-38-revision-flashcards.html" title="Unit 3.8 Revision Flashcards">Unit 3.8 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38195/unit-39-revision-flashcards.html" title="Unit 3.9 Revision Flashcards">Unit 3.9 Revision Flashcards</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38196/flashcards-revision-unit-4.html" title="Flashcards - Revision (Unit 4)">Flashcards - Revision (Unit 4)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38198/unit-41-revision-flashcards.html" title="Unit 4.1 Revision Flashcards">Unit 4.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38203/unit-42-revision-flashcards.html" title="Unit 4.2 Revision Flashcards">Unit 4.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38217/unit-43-revision-flashcards.html" title="Unit 4.3 Revision Flashcards">Unit 4.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38218/unit-44-revision-flashcards.html" title="Unit 4.4 Revision Flashcards">Unit 4.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38219/unit-45a-product-revision-flashcards.html" title="Unit 4.5a Product Revision Flashcards">Unit 4.5a Product Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38220/unit-45b-price-revision-flashcards.html" title="Unit 4.5b Price Revision Flashcards">Unit 4.5b Price Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38221/unit-45c-promotion-revision-flashcards.html" title="Unit 4.5c Promotion Revision Flashcards">Unit 4.5c Promotion Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38222/unit-45d-promotion-revision-flashcards.html" title="Unit 4.5d Promotion Revision Flashcards">Unit 4.5d Promotion Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38223/unit-46-revision-flashcards-hl.html" title="Unit 4.6 Revision Flashcards (HL)">Unit 4.6 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38224/unit-47-revision-flashcards-hl.html" title="Unit 4.7 Revision Flashcards (HL)">Unit 4.7 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38225/unit-48-e-commerce-flashcards.html" title="Unit 4.8 E-commerce Flashcards">Unit 4.8 E-commerce Flashcards</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38232/flashcards-revision-unit-5.html" title="Flashcards - Revision (Unit 5)">Flashcards - Revision (Unit 5)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38233/unit-51-revision-flashcards.html" title="Unit 5.1 Revision Flashcards">Unit 5.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38234/unit-52-revision-flashcards.html" title="Unit 5.2 Revision Flashcards">Unit 5.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38235/unit-53-revision-flashcards-hl.html" title="Unit 5.3 Revision Flashcards (HL)">Unit 5.3 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38236/unit-54-revision-flashcards.html" title="Unit 5.4 Revision Flashcards">Unit 5.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38237/unit-55-revision-flashcards-hl.html" title="Unit 5.5 Revision Flashcards (HL)">Unit 5.5 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38238/unit-56-revision-flashcards-hl.html" title="Unit 5.6 Revision Flashcards (HL)">Unit 5.6 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38239/unit-57-revision-flashcards-hl.html" title="Unit 5.7 Revision Flashcards (HL)">Unit 5.7 Revision Flashcards (HL)</a></li></ul></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../33830/formulae-quiz.html" title="Formulae Quiz">Formulae Quiz</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Paper 1 Pre-release case study">Paper 1 Pre-release case study</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44969/n22-case-study-ele-plc.html" title="N22 Case Study (ELE PLC)">N22 Case Study (ELE PLC)</a></li><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="M22 (Peacewick Uni)">M22 (Peacewick Uni)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../44106/additional-exam-questions-paper-1.html" title="Additional exam questions (Paper 1)">Additional exam questions (Paper 1)</a></li></ul><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../32840/may-2020-p-s-trawlers.html" title="May 2020 (P&S Trawlers)">May 2020 (P&S Trawlers)</a></li><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="M23 Paper 1">M23 Paper 1</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../47825/paper-1-svt-study-guide-shirin-karimi.html" title="Paper 1 SVT Study Guide (Shirin Karimi)">Paper 1 SVT Study Guide (Shirin Karimi)</a></li></ul></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26095/exam-study-tips-resources.html" title="Exam & Study tips (resources)">Exam & Study tips (resources)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31342/revision-exams-top-tips.html" title="Revision & Exams - Top tips">Revision & Exams - Top tips</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../47460/top-tips-for-m23-exams.html" title="Top Tips for M23 Exams">Top Tips for M23 Exams</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43522/unit-1-intro-to-bm.html" title="Unit 1 - Intro to BM">Unit 1 - Intro to BM</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44034/11-what-is-a-business.html" title="1.1 What is a business?">1.1 What is a business?</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399695.html" title="The nature of business">The nature of business</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399694.html" title="Primary, secondary, tertiary, & quaternary sectors">Primary, secondary, tertiary, & quaternary sectors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399693.html" title="Entrepreneurship">Entrepreneurship</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399692.html" title="Challenges & opportunities for starting a business">Challenges & opportunities for starting a business</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399691.html" title="1.1 True or False Quiz">1.1 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399690.html" title="1.1 Revision Flashcards">1.1 Revision Flashcards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399689.html" title="1.1 Glossary of key terms">1.1 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399681.html" title="1.2 Types of business entities">1.2 Types of business entities</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399688.html" title="Public & private sectors">Public & private sectors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399687.html" title="Types of for-profit organizations">Types of for-profit organizations</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399686.html" title="For-profit social enterprises">For-profit social enterprises</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399685.html" title="Non-profit social enterprises">Non-profit social enterprises</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399684.html" title="True or False quiz">True or False quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399683.html" title="1.2 Revision Flashcards">1.2 Revision Flashcards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399682.html" title="1.2 Glossary of key terms">1.2 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44041/13-business-objectives.html" title="1.3 Business objectives">1.3 Business objectives</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399679.html" title="Vision and mission statements">Vision and mission statements</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399680.html" title="Common business objectives">Common business objectives</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399678.html" title="Strategic & tactical objectives">Strategic & tactical objectives</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399677.html" title="Corporate social responsibility">Corporate social responsibility</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399676.html" title="1.3 Revision Flashcards">1.3 Revision Flashcards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399674.html" title="True or False quiz">True or False quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399675.html" title="1.3 Glossary of Key terms">1.3 Glossary of Key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44044/14-stakeholders.html" title="1.4 Stakeholders">1.4 Stakeholders</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399673.html" title="The interests of stakeholders">The interests of stakeholders</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399672.html" title="Conflict between stakeholders">Conflict between stakeholders</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399670.html" title="Unit 1.4 Revision Flashcards">Unit 1.4 Revision Flashcards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399669.html" title="1.4 True or False">1.4 True or False</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399671.html" title="1.4 Glossary of Key terms">1.4 Glossary of Key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44045/15-growth-and-evolution.html" title="1.5 Growth and evolution">1.5 Growth and evolution</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44212/economies-diseconomies-of-scale-1.html" title="Economies & diseconomies of scale">Economies & diseconomies of scale</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44214/internal-and-external-growth-1.html" title="Internal and external growth">Internal and external growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44220/external-growth-methods-1.html" title="External growth methods">External growth methods</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44219/reasons-to-grow-or-stay-small-1.html" title="Reasons to grow or stay small">Reasons to grow or stay small</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45586/unit-15revision-flashcards-1.html" title="Unit 1.5 Revision Flashcards">Unit 1.5 Revision Flashcards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45450/true-or-false-quiz-1.html" title="True or False quiz">True or False quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43673/15-glossary-of-key-terms-1.html" title="1.5 Glossary of key terms">1.5 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44046/16-multinational-companies.html" title="1.6 Multinational companies">1.6 Multinational companies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44236/the-impact-of-mncs-on-host-countries-ao3-1.html" title="The impact of MNCs on host countries (AO3)">The impact of MNCs on host countries (AO3)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44240/video-documentaries-mncs-1.html" title="Video documentaries - MNCs">Video documentaries - MNCs</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45587/16-glossary-of-key-terms-1.html" title="1.6 Glossary of key terms">1.6 Glossary of key terms</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43530/unit-2-hrm.html" title="Unit 2 - HRM">Unit 2 - HRM</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44253/21-introduction-to-hrm.html" title="2.1 Introduction to HRM">2.1 Introduction to HRM</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44256/role-of-hrm.html" title="Role of HRM">Role of HRM</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44257/factors-that-influence-hr-planning.html" title="Factors that influence HR planning">Factors that influence HR planning</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44282/reasons-for-resistance-to-change.html" title="Reasons for resistance to change">Reasons for resistance to change</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44283/hr-strategies-for-reducing-the-impact-of-change-resistance-to-ch.html" title="HR strategies for reducing the impact of change & resistance to change">HR strategies for reducing the impact of change & resistance to change</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45458/21-true-or-false-quiz.html" title="2.1 True or False quiz">2.1 True or False quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43677/21-glossary-of-key-terms.html" title="2.1 Glossary of key terms">2.1 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43875/22-organizational-structure.html" title="2.2 Organizational structure">2.2 Organizational structure</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44296/terminology-for-understanding-organizational-structures-1.html" title="Terminology for understanding organizational structures">Terminology for understanding organizational structures</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44310/types-of-organization-charts-1.html" title="Types of organization charts">Types of organization charts</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44323/appropriateness-of-organizational-structures-and-external-factor-1.html" title="Appropriateness of organizational structures and external factors">Appropriateness of organizational structures and external factors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44316/changes-in-organizational-structures-hl-1.html" title="Changes in organizational structures (HL)">Changes in organizational structures (HL)</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44338/23-leadership-and-management.html" title="2.3 Leadership and management">2.3 Leadership and management</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44343/scientific-intuitive-management-hl-1.html" title="Scientific & intuitive management (HL)">Scientific & intuitive management (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44339/management-and-leadership-1.html" title="Management and leadership">Management and leadership</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44340/leadership-styles-1.html" title="Leadership styles">Leadership styles</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45462/23-true-or-false-quiz.html" title="2.3 True or False Quiz">2.3 True or False Quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43829/24-motivation-and-demotivation.html" title="2.4 Motivation and demotivation">2.4 Motivation and demotivation</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44349/motivation-theories-sl-hl-1.html" title="Motivation theories (SL & HL)">Motivation theories (SL & HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44353/motivation-theories-hl-1.html" title="Motivation theories (HL)">Motivation theories (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44354/labour-turnover-hl-1.html" title="Labour turnover (HL)">Labour turnover (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44361/types-of-appraisal-hl-1.html" title="Types of appraisal (HL)">Types of appraisal (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44383/methods-of-recruitment-hl-1.html" title="Methods of recruitment (HL)">Methods of recruitment (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44382/internal-external-recruitment-hl-1.html" title="Internal & external recruitment (HL)">Internal & external recruitment (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44363/types-of-financial-rewards-1.html" title="Types of financial rewards">Types of financial rewards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44370/types-of-non-financial-rewards-1.html" title="Types of non-financial rewards">Types of non-financial rewards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44371/types-of-training.html" title="Types of training">Types of training</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44390/25-organizational-corporate-culture-hl.html" title="2.5 Organizational (corporate) culture (HL)">2.5 Organizational (corporate) culture (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44392/organizational-culture-hl-1.html" title="Organizational culture (HL)">Organizational culture (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44393/types-of-organizational-culture-hl-1.html" title="Types of organizational culture (HL)">Types of organizational culture (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44394/cultural-clashes-hl-1.html" title="Cultural clashes (HL)">Cultural clashes (HL)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44247/26-communication.html" title="2.6 Communication">2.6 Communication</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43545/unit-3-finance.html" title="Unit 3 - Finance">Unit 3 - Finance</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44435/31-introduction-to-finance.html" title="3.1 Introduction to finance">3.1 Introduction to finance</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44431/31-introduction-to-finance-role-of-finance.html" title="3.1 Introduction to finance - role of finance">3.1 Introduction to finance - role of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45634/31-glossary-of-key-term.html" title="3.1 Glossary of key term">3.1 Glossary of key term</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44436/32-sources-of-finance.html" title="3.2 Sources of finance">3.2 Sources of finance</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44437/internal-sources-of-finance.html" title="Internal sources of finance">Internal sources of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44450/external-sources-of-finance.html" title="External sources of finance">External sources of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44479/appropriateness-of-sources-of-finance.html" title="Appropriateness of sources of finance">Appropriateness of sources of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45483/32-true-or-false-quiz.html" title="3.2 True or False Quiz">3.2 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43688/32-glossary-of-key-terms.html" title="3.2 Glossary of key terms">3.2 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44486/33-costs-and-revenues.html" title="3.3 Costs and revenues">3.3 Costs and revenues</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44487/types-of-costs-1.html" title="Types of costs">Types of costs</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44491/total-revenue-revenue-streams-1.html" title="Total revenue & revenue streams">Total revenue & revenue streams</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45484/33-true-or-false-quiz-1.html" title="3.3 True or false quiz">3.3 True or false quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45657/33-glossary-of-key-terms-1.html" title="3.3 Glossary of key terms">3.3 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44492/34-final-accounts.html" title="3.4 Final accounts">3.4 Final accounts</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44527/the-purpose-of-accounts-to-different-stakeholders-1.html" title="The purpose of accounts to different stakeholders">The purpose of accounts to different stakeholders</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44577/profit-loss-account-2.html" title="Profit & loss account">Profit & loss account</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44579/balance-sheets-1.html" title="Balance sheets">Balance sheets</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44560/types-of-intangible-assets-1.html" title="Types of intangible assets">Types of intangible assets</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44585/depreciation-hl-1.html" title="Depreciation (HL)">Depreciation (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45919/34-true-or-false-quiz-1.html" title="3.4 True or False Quiz">3.4 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45658/34-glossary-of-key-terms-1.html" title="3.4 Glossary of key terms">3.4 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44593/35-profitability-liquidity-ratio-analysis.html" title="3.5 Profitability & liquidity ratio analysis">3.5 Profitability & liquidity ratio analysis</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44595/profitability-ratios.html" title="Profitability ratios">Profitability ratios</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44626/liquidity-ratios-1.html" title="Liquidity ratios">Liquidity ratios</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45486/35-true-or-false-quiz-1.html" title="3.5 True or False Quiz">3.5 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45661/35-glossary-of-key-terms-1.html" title="3.5 Glossary of key terms">3.5 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44627/36-efficiency-ratio-analysis-hl-only.html" title="3.6 Efficiency ratio analysis (HL only)">3.6 Efficiency ratio analysis (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44805/efficiency-ratios-hl-1.html" title="Efficiency ratios (HL)">Efficiency ratios (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44633/insolvency-versus-bankruptcy-1.html" title="Insolvency versus bankruptcy">Insolvency versus bankruptcy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45488/36-true-or-false-quiz-1.html" title="3.6 True or False Quiz">3.6 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45662/36-glossary-of-key-terms-1.html" title="3.6 Glossary of key terms">3.6 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44493/37-cash-flow.html" title="3.7 Cash flow">3.7 Cash flow</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44502/the-difference-between-profit-cash-flow-1.html" title="The difference between profit & cash flow">The difference between profit & cash flow</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44506/working-capital-1.html" title="Working capital">Working capital</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44557/liquidity-position-1.html" title="Liquidity position">Liquidity position</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44558/cash-flow-forecasts-1.html" title="Cash flow forecasts">Cash flow forecasts</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44507/relationship-between-investment-profit-cash-flow-1.html" title="Relationship between investment, profit & cash flow">Relationship between investment, profit & cash flow</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44509/strategies-for-dealing-with-cash-flow-problems-1.html" title="Strategies for dealing with cash flow problems">Strategies for dealing with cash flow problems</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45493/37-true-or-false-1.html" title="3.7 True or False">3.7 True or False</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43687/37-glossary-of-key-terms-1.html" title="3.7 Glossary of key terms">3.7 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44515/38-investment-appraisal.html" title="3.8 Investment appraisal">3.8 Investment appraisal</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44516/payback-period-average-rate-of-return-1.html" title="Payback period & Average rate of return">Payback period & Average rate of return</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44519/net-present-value-npv-hl.html" title="Net present value (NPV) (HL)">Net present value (NPV) (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45494/38-true-or-false-quiz-1.html" title="3.8 True or False Quiz">3.8 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43693/38-glossary-of-key-terms-1.html" title="3.8 Glossary of key terms">3.8 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44564/39-budgets-hl.html" title="3.9 Budgets (HL)">3.9 Budgets (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44565/the-difference-between-cost-profit-centres-1.html" title="The difference between cost & profit centres">The difference between cost & profit centres</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44568/the-roles-of-cost-profit-centres-1.html" title="The roles of cost & profit centres">The roles of cost & profit centres</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44576/constructing-budgets-1.html" title="Constructing budgets">Constructing budgets</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44569/variances-1.html" title="Variances">Variances</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44571/the-importance-of-budgets-variances-1.html" title="The importance of budgets & variances">The importance of budgets & variances</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45495/39-true-or-false-quiz-1.html" title="3.9 True or False Quiz">3.9 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43694/39-glossary-of-key-terms.html" title="3.9 Glossary of key terms">3.9 Glossary of key terms</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43547/unit-4-marketing.html" title="Unit 4 - Marketing">Unit 4 - Marketing</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44637/41-introduction-to-marketing.html" title="4.1 Introduction to marketing">4.1 Introduction to marketing</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44638/market-orientation-vs-product-orientation-1.html" title="Market orientation vs Product orientation">Market orientation vs Product orientation</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44639/market-share-1.html" title="Market share">Market share</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44641/market-growth-1.html" title="Market growth">Market growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44642/importance-of-market-share-market-leadership-hl-1.html" title="Importance of market share & market leadership (HL)">Importance of market share & market leadership (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43695/41-glossary-of-key-terms-1.html" title="4.1 Glossary of key terms">4.1 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43823/42-marketing-planning.html" title="4.2 Marketing planning">4.2 Marketing planning</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44645/the-role-of-marketing-planning-1.html" title="The role of marketing planning">The role of marketing planning</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44654/segmentation-targeting-and-positioning-1.html" title="Segmentation, targeting, and positioning">Segmentation, targeting, and positioning</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44646/difference-between-niche-mass-market-1.html" title="Difference between niche & mass market">Difference between niche & mass market</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43821/the-importance-of-having-a-usp-1.html" title="The importance of having a USP">The importance of having a USP</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44655/how-organizations-differentiate-themselves-1.html" title="How organizations differentiate themselves">How organizations differentiate themselves</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43834/42-vocab-quiz-1.html" title="4.2 Vocab Quiz">4.2 Vocab Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45528/42-true-or-false-quiz-1.html" title="4.2 True or False Quiz">4.2 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43696/42-glossary-of-key-terms-1.html" title="4.2 Glossary of key terms">4.2 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44660/43-sales-forecasting-hl.html" title="4.3 Sales forecasting (HL)">4.3 Sales forecasting (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44669/benefits-limitations-of-sales-forecasting.html" title="Benefits & limitations of sales forecasting">Benefits & limitations of sales forecasting</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45530/43-true-or-false-quiz-1.html" title="4.3 True or False Quiz">4.3 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43711/43-glossary-of-key-terms-1.html" title="4.3 Glossary of key terms">4.3 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44679/44-market-research.html" title="4.4 Market research">4.4 Market research</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44680/why-how-organizations-carry-out-market-research.html" title="Why & how organizations carry out market research">Why & how organizations carry out market research</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44692/methodstechniques-of-primary-market-research-1.html" title="Methods/techniques of primary market research">Methods/techniques of primary market research</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44693/methodstechniques-of-secondary-market-research-1.html" title="Methods/techniques of secondary market research">Methods/techniques of secondary market research</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44694/qualitative-quantitative-research-1.html" title="Qualitative & quantitative research">Qualitative & quantitative research</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44695/methods-of-sampling-1.html" title="Methods of sampling">Methods of sampling</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45531/44-true-or-false-quiz-1.html" title="4.4 True or False Quiz">4.4 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43712/44-glossary-of-key-terms-1.html" title="4.4 Glossary of key terms">4.4 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44720/45-the-seven-ps-of-the-marketing-mix.html" title="4.5 The seven Ps of the marketing mix">4.5 The seven Ps of the marketing mix</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44740/451-product.html" title="4.5.1 Product">4.5.1 Product</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44741/the-product-life-cycle-1.html" title="The product life cycle">The product life cycle</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44745/extension-strategies-1.html" title="Extension strategies">Extension strategies</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44981/relationship-between-the-plc-investment-profit-cash-flow-1.html" title="Relationship between the PLC, investment, profit & cash flow">Relationship between the PLC, investment, profit & cash flow</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44748/aspects-of-branding.html" title="Aspects of branding">Aspects of branding</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44757/the-importance-of-branding-1.html" title="The importance of branding">The importance of branding</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../45766/starterplenary-activity-anagrams-quiz-brands-1.html" title="Starter/Plenary activity - Anagrams Quiz (Brands)">Starter/Plenary activity - Anagrams Quiz (Brands)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../45957/starterplenary-activity-whats-in-a-brand-name-1.html" title="Starter/Plenary activity - What's in a (brand) name?">Starter/Plenary activity - What's in a (brand) name?</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43713/45-glossary-of-key-terms-product-1.html" title="4.5 Glossary of key terms (Product)">4.5 Glossary of key terms (Product)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../42547/452-price-1.html" title="4.5.2 Price">4.5.2 Price</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43719/45-key-terms-price-1.html" title="4.5 Key Terms (Price)">4.5 Key Terms (Price)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44782/453-promotion.html" title="4.5.3 Promotion">4.5.3 Promotion</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44783/above-the-line-promotion-1.html" title="Above the line promotion">Above the line promotion</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44795/below-the-line-promotion-1.html" title="Below the line promotion">Below the line promotion</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44797/through-the-line-promotion-1.html" title="Through the line promotion">Through the line promotion</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44801/social-media-marketing-1.html" title="Social media marketing">Social media marketing</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43721/45-glossary-of-key-terms-1.html" title="4.5 Glossary of key terms">4.5 Glossary of key terms</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44803/454-place-1.html" title="4.5.4 Place">4.5.4 Place</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44804/the-importance-of-different-distribution-channels-1.html" title="The importance of different distribution channels">The importance of different distribution channels</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43722/45-glossary-of-key-terms-1.html" title="4.5 Glossary of key terms">4.5 Glossary of key terms</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44758/455-people-1.html" title="4.5.5 People">4.5.5 People</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44773/456-processes-1.html" title="4.5.6 Processes">4.5.6 Processes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44774/457-physical-evidence-1.html" title="4.5.7 Physical evidence">4.5.7 Physical evidence</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44982/appropriate-marketing-mixes-1.html" title="Appropriate marketing mixes">Appropriate marketing mixes</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44697/46-international-marketing-hl.html" title="4.6 International marketing (HL)">4.6 International marketing (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44698/opportunities-threats-posed-by-entry-into-international-markets-1.html" title="Opportunities & threats posed by entry into international markets">Opportunities & threats posed by entry into international markets</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45537/46-true-or-false-quiz-1.html" title="4.6 True or False Quiz">4.6 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45736/46-glossary-of-key-terms-1.html" title="4.6 Glossary of key terms">4.6 Glossary of key terms</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43565/unit-5-operations-mgt.html" title="Unit 5 - Operations Mgt">Unit 5 - Operations Mgt</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44817/51-introduction-to-operations-management.html" title="5.1 Introduction to operations management">5.1 Introduction to operations management</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44818/the-role-of-operations-management-1.html" title="The role of operations management">The role of operations management</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44812/52-operations-methods.html" title="5.2 Operations methods">5.2 Operations methods</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44815/operations-methods-1.html" title="Operations methods">Operations methods</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44861/53-lean-production-quality-management-hl.html" title="5.3 Lean production & quality management (HL)">5.3 Lean production & quality management (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44864/features-of-lean-production.html" title="Features of lean production">Features of lean production</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44872/methods-of-lean-production.html" title="Methods of lean production">Methods of lean production</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44874/cradle-to-cradle-design-manufacturing.html" title="Cradle to cradle design & manufacturing">Cradle to cradle design & manufacturing</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44875/quality-control-quality-assurance.html" title="Quality control & quality assurance">Quality control & quality assurance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44876/methods-of-managing-quality.html" title="Methods of managing quality">Methods of managing quality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44877/the-impact-of-lean-production-tqm.html" title="The impact of lean production & TQM">The impact of lean production & TQM</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44878/national-international-quality-standards.html" title="National & international quality standards">National & international quality standards</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44840/55-break-even-analysis.html" title="5.5 Break-even analysis">5.5 Break-even analysis</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44843/contribution.html" title="Contribution">Contribution</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44848/aspects-of-break-even-analysis.html" title="Aspects of break-even analysis">Aspects of break-even analysis</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44851/changes-in-price-and-costs.html" title="Changes in price and costs">Changes in price and costs</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44852/limitations-of-break-even-analysis.html" title="Limitations of break-even analysis">Limitations of break-even analysis</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44890/56-production-planning-hl.html" title="5.6 Production planning (HL)">5.6 Production planning (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44902/the-local-global-supply-chain-process.html" title="The local & global supply chain process">The local & global supply chain process</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44922/the-difference-between-jit-jic.html" title="The difference between JIT & JIC">The difference between JIT & JIC</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44931/stock-control-charts.html" title="Stock control charts">Stock control charts</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44970/capacity-utilization-rate.html" title="Capacity utilization rate">Capacity utilization rate</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45125/defect-rate.html" title="Defect rate">Defect rate</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43832/productivity.html" title="Productivity">Productivity</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45187/cost-to-buy-cost-to-make.html" title="Cost to buy & Cost to make">Cost to buy & Cost to make</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../46353/sinterklaas-putting-ctb-vs-ctm-into-practice.html" title="Sinterklaas - Putting CTB vs CTM into practice">Sinterklaas - Putting CTB vs CTM into practice</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45242/57-crisis-management-contingency-planning-hl.html" title="5.7 Crisis management & contingency planning (HL)">5.7 Crisis management & contingency planning (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45243/difference-between-crisis-management-contingency-planning.html" title="Difference between crisis management & contingency planning">Difference between crisis management & contingency planning</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45268/impact-of-contingency-planning.html" title="Impact of contingency planning">Impact of contingency planning</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45260/factors-that-affect-effective-crisis-management.html" title="Factors that affect effective crisis management">Factors that affect effective crisis management</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45554/57-true-or-false-quiz.html" title="5.7 True or False Quiz">5.7 True or False Quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45669/59-management-information-systems-hl.html" title="5.9 Management Information Systems (HL)">5.9 Management Information Systems (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../42633/data-analytics.html" title="Data analytics">Data analytics</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45861/database.html" title="Database">Database</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44966/cybersecurity-and-cybercrime.html" title="Cybersecurity and cybercrime">Cybersecurity and cybercrime</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45859/critical-infrastructures.html" title="Critical infrastructures">Critical infrastructures</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../46175/virtual-reality.html" title="Virtual reality">Virtual reality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45862/the-internet-of-things.html" title="The internet of things">The internet of things</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45858/artificial-intelligence.html" title="Artificial intelligence">Artificial intelligence</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../42634/big-data.html" title="Big data">Big data</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43392/customer-loyalty-programmes.html" title="Customer loyalty programmes">Customer loyalty programmes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43395/digital-taylorism.html" title="Digital Taylorism">Digital Taylorism</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45671/data-mining.html" title="Data mining">Data mining</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45856/benefits-risks-ethical-implications-of-mis.html" title="Benefits, risks, & ethical implications of MIS">Benefits, risks, & ethical implications of MIS</a></li></ul></ul><li class="ancestor parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../42640/bmt-.html" title="BMT ">BMT </a></li><ul class="level-1 expanded"><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399696.html" title="BMT 1 - SWOT analysis">BMT 1 - SWOT analysis</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399697.html" title="BMT 2 - Ansoff matrix">BMT 2 - Ansoff matrix</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44027/bmt-3-steeple-analysis.html" title="BMT 3 - STEEPLE analysis">BMT 3 - STEEPLE analysis</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42577/bmt-4-boston-consulting-group-matrix.html" title="BMT 4 - Boston Consulting Group matrix">BMT 4 - Boston Consulting Group matrix</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42956/bmt-5-business-plans.html" title="BMT 5 - Business plans">BMT 5 - Business plans</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43606/bmt-6-decision-trees.html" title="BMT 6 - Decision trees">BMT 6 - Decision trees</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42362/bmt-7-descriptive-statistics.html" title="BMT 7 - Descriptive statistics">BMT 7 - Descriptive statistics</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42226/bmt-8-circular-business-models.html" title="BMT 8 - Circular Business Models">BMT 8 - Circular Business Models</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43605/bmt-9-gantt-chart-hl-only.html" title="BMT 9 - Gantt chart (HL only)">BMT 9 - Gantt chart (HL only)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42214/bmt-10-porters-generic-strategies-hl-only.html" title="BMT 10 - Porter's generic strategies (HL only)">BMT 10 - Porter's generic strategies (HL only)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42216/bmt-11-hofstedes-cultural-dimensions-hl-only.html" title="BMT 11 - Hofstede's cultural dimensions (HL only)">BMT 11 - Hofstede's cultural dimensions (HL only)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399698.html" title="BMT 12 - Force field analysis (HL only)">BMT 12 - Force field analysis (HL only)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42375/bmt-13-critical-path-analysis-hl-only.html" title="BMT 13 - Critical path analysis (HL only)">BMT 13 - Critical path analysis (HL only)</a></li><li class="current" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="bmt-14-contribution-hl-only-.html" title="BMT 14 - Contribution (HL only) ">BMT 14 - Contribution (HL only) </a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42311/bmt-15-simple-linear-regression-hl-only.html" title="BMT 15 - Simple linear regression (HL only)">BMT 15 - Simple linear regression (HL only)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../42758/concepts.html" title="Concepts">Concepts</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43633/creativity.html" title="Creativity">Creativity</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43631/ethics.html" title="Ethics">Ethics</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43435/sustainability.html" title="Sustainability">Sustainability</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43668/change.html" title="Change">Change</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../42836/ia-.html" title="IA ">IA </a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44415/formulating-suitable-ia-questions.html" title="Formulating suitable IA questions">Formulating suitable IA questions</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../47685/supporting-documents-for-the-ia.html" title="Supporting documents for the IA">Supporting documents for the IA</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../47840/top-tips-for-the-ia-primary-research.html" title="Top tips for the IA – Primary research">Top tips for the IA – Primary research</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44047/50-sample-ia-research-questions-1.html" title="50+ Sample IA research questions">50+ Sample IA research questions</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../46719/recommended-format-for-the-ia.html" title="Recommended format for the IA">Recommended format for the IA</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43603/exams.html" title="Exams">Exams</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44091/paper-1.html" title="Paper 1">Paper 1</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Paper 2">Paper 2</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../46637/01-ikea.html" title="01 - IKEA">01 - IKEA</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45839/quantitative-techniques.html" title="Quantitative techniques">Quantitative techniques</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../46025/abbreviations-quiz.html" title="Abbreviations Quiz">Abbreviations Quiz</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43740/command-terms.html" title="Command terms">Command terms</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45612/glossary-of-key-terms.html" title="Glossary of key terms">Glossary of key terms</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../33955/the-core.html" title="The Core">The Core</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../34902/cas-bm.html" title="CAS & BM">CAS & BM</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21665/the-ee.html" title="The EE">The EE</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21934/the-bm-extended-essay.html" title="The BM Extended Essay">The BM Extended Essay</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32857/ee-planning-form.html" title="EE Planning form">EE Planning form</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../37390/managing-the-ee-process.html" title="Managing the EE process">Managing the EE process</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../37496/top-10-tips-for-the-bm-ee.html" title="Top 10 tips for the BM EE">Top 10 tips for the BM EE</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21930/70-top-bm-ee-research-questions.html" title="70 top BM EE Research Questions">70 top BM EE Research Questions</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22196/tools-techniques-theories-for-the-ee.html" title="Tools, techniques & theories for the EE">Tools, techniques & theories for the EE</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44048/the-triple-bottom-line.html" title="The triple bottom line">The triple bottom line</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21836/understanding-the-assessment-criteria.html" title="Understanding the assessment criteria">Understanding the assessment criteria</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../37960/reflections-and-engagement-in-the-ee.html" title="Reflections and engagement in the EE">Reflections and engagement in the EE</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41874/the-mandatory-reflection-sessions.html" title="The mandatory reflection sessions">The mandatory reflection sessions</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../37659/top-10-tips-for-completing-the-rppf-1.html" title="Top 10 Tips for completing the RPPF">Top 10 Tips for completing the RPPF</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21945/academic-integrity-the-ee-1.html" title="Academic Integrity & the EE">Academic Integrity & the EE</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../37573/citation-and-referencing.html" title="Citation and Referencing">Citation and Referencing</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39260/ee-checklist.html" title="EE Checklist">EE Checklist</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../25192/tok-bm.html" title="TOK & BM">TOK & BM</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../22100/misc.html" title="Misc">Misc</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../22208/how-well-do-you-know-the-bm-course.html" title="How well do you know the BM course?">How well do you know the BM course?</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Distance Learning">Distance Learning</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39730/financial-literacy-simulation-game.html" title="Financial literacy simulation game">Financial literacy simulation game</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34551/starter-activities-business-management-trivia-quizzes.html" title="Starter Activities - Business Management Trivia Quizzes">Starter Activities - Business Management Trivia Quizzes</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" 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<div id="main-column" class="span9"> <article id="bmt-14-contribution-hl-only-" style="margin-top: 16px;">
<h1 class="section-title">BMT 14 - Contribution (HL only) </h1>
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<div class="panel panel-purple"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"></span><span style="color:#FF0000;"></span>Business Management Toolkit 14 </span> - Contribution analysis (HL only)</strong></p></div></div><div class="panel-body"><div><p><img alt="" src="../../../ib/businessmanagement/images/money(2).jpg" style="width: 280px; height: 169px;"></p><p>This section of the Business Management Toolkit covers three aspects of contribution:</p><p>(i) Make or buy analysis</p><p>(ii) Contribution costing, and</p><p>(iii) Absorption costing.</p></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-expandable panel-purple"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;">1. Make or Buy analysis</span></strong></p></div></div><div class="panel-body"><div><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" height="194" src="../../../ib/businessmanagement/images/make-or-buy.jpg" width="300"></span></p><p><strong>Make or buy analysis </strong>is a quantitative tool that involves a business choosing between making (manufacturing) a product in-house or to purchase it from an external provider (outsourced supplier). Hence, a make or buy decision is also referred to as an <strong>outsourcing decision</strong>.</p><p><span style="font-family:arial,helvetica,sans-serif;">In-house production enables the organization to have closer control over costs and quality. It also allows the business to have better overall management of the production process. <span style="font-family:arial,helvetica,sans-serif;">However, using third party suppliers (subcontractors) can create flexibility and capacity for the business, such as dealing with unexpected fluctuations in the level of demand. Subcontractors may also be more productive and cost-effective.</span></span></p><p>For example, the Ford Motor Company (FMC) buys vehicle seats, tyres, windscreen wipers, as well as many other components and individual parts, for its various trucks and automobiles from numerous suppliers and then assembles them at the FMC's factories. With each component, the FMC must decide if it is more cost effective to make that part internally or to buy that component from an outsourced supplier.</p><p>Note that outsourcing also applies to the services sector. Outsourcing is the act of using another organization to provide goods or services. For example, many businesses choose to an external supplier for services such as market research activities, accounting services, IT maintenance, security services, catering services, payroll and data processing services, as well as cleaning and maintenance.</p><p>To compare the <strong>cost to make</strong> (CTM) and <strong>cost to buy</strong> (CTB), a business needs to consider the direct costs to manufacture a product in-house against the quoted price of a supplier or outsourced third party provider.<span style="font-family:arial,helvetica,sans-serif;"> In general, there are two straightforward quantitative techniques that can be used when businesses decide whether to make or buy. These methods are called the “cost to make” and “cost to buy”. In quantitative terms,</span></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">If the CTM > CTB, the firm will use outsourcing or subcontracting</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">If the CTB > CTM, the firm will use insourcing (in-house production)</span>.</p></li></ul><p>However, other related factors to consider in deciding whether to make or buy include:</p><ul class="branded"><li><p>Whether the business has sufficient capacity, including labour resources, to produce the product in-house.</p></li><li><p>Similarly, whether the business has sufficient expertise to make the products in-house. If not, the business may have no choice but to outsource the work to a third-party supplier.</p></li><li><p>Whether the supplier is reputable / reliable enough to produce the products in sufficient quantities, to the quality standards, and in a timely manner.</p></li><li><p>If the business is relatively small, it may lack negotiation / bargaining power as a customer with its suppliers, which may have detrimental impacts on prices and delivery times.</p></li><li><p>The degree of control the business needs or wants. If a particular product has a direct impact on the image or perception of the business, it may be more pragmatic for the firm to make the product in-house rather than relying on an outsourced provider to do so. Conversely, if a particular good or service has little or minimal importance, it becomes easier to shift this to an outsourced provider.</p></li></ul><hr class="hidden"><h5><span style="font-family:arial,helvetica,sans-serif;">Cost to buy (CTB)</span></h5><p><img alt="" src="../../../ib/businessmanagement/images/buy.jpg" style="width: 320px; height: 78px;"></p><p><span style="font-family:arial,helvetica,sans-serif;">The <strong>cost to buy</strong> (CTB) method calculates the total cost of subcontracting production to a third-party supplier.</span></p><p><span style="font-family:arial,helvetica,sans-serif;">For example, some of the world’s largest electronics companies subcontract production to Foxconn in China. Foxconn is the world’s biggest contract electronics manufacturer. The Taiwanese multinational producer makes products for its clients, which include: Apple (iPad and iPhone), Amazon (Kindle), Nintendo (Wii U), Sony (PlayStation) and Microsoft (Xbox One).</span></p><hr class="hidden"><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" src="../../../ib/businessmanagement/images/workers(1).jpg" style="width: 300px; height: 200px;"></span></p><p><span style="color:#696969;"><span style="font-family:arial,helvetica,sans-serif;"><em>China has provided many opportunities to use sub-contractors</em></span></span></p><hr class="hidden"><p><span style="font-family:arial,helvetica,sans-serif;">As a customer, the cost to buy (CTB) a product from a supplier is calculated as:</span></p><div class="dottedBox"><p style="text-align: center;"><span style="font-family:arial,helvetica,sans-serif;">Cost to buy (CTB) = Price × Quantity</span></p><p><span style="font-family:arial,helvetica,sans-serif;">or</span></p><p style="text-align: center;"><span style="font-family:arial,helvetica,sans-serif;">CTB = P × Q</span></p></div><p><span style="font-family:arial,helvetica,sans-serif;">The CTB method allows the business to calculate the total cost of outsourcing production. If the cost to buy is less than the cost to make, then it makes financial sense for the firm to purchase the product from a third party provider, rather than making it in-house.</span></p><hr class="hidden"><h5><span style="font-family:arial,helvetica,sans-serif;">Cost to make (CTM)</span></h5><p><img alt="" height="200" src="../../../ib/businessmanagement/images/manufacturing(1).jpg" width="300"></p><p><span style="font-family:arial,helvetica,sans-serif;">In a make or buy decision, managers calculate the costs of producing a product compared to the overall cost of buying the product from a supplier instead. <span style="font-family:arial,helvetica,sans-serif;">The <strong>cost to make </strong>(CTM) refers to the total costs of producing a good or service in-house, rather than using a third-party supplier. </span>The CTM a good or service in-house is calculated by using the formula:</span></p><div class="dottedBox"><p><span style="font-family:arial,helvetica,sans-serif;">Cost to make = Total costs of production = </span><span style="font-family:arial,helvetica,sans-serif;">Total fixed costs + Total variable costs</span></p><p><span style="font-family:arial,helvetica,sans-serif;">or</span></p><p><span style="font-family:arial,helvetica,sans-serif;">CTM = TFC + TVC</span></p></div><hr class="hidden"><section class="tib-hiddenbox"><p><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;">Fixed costs and variable costs are covered in</span> <a href="../21745/32-costs-and-revenues.html" title="Unit 3 » 3.2 Costs and revenues">Unit 3.2 costs and revenues</a>.</span></p></section><div class="box"><h5><span style="color:#FF0000;"><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-calculator fa-lg" style="color: rgb(61, 30, 128);"> </span> Worked example</span></span></h5><p><span style="font-family:arial,helvetica,sans-serif;">Consider the worked example below:</span></p><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" src="../../../ib/businessmanagement/images/cupcakes.jpg" style="width: 320px; height: 111px;"></span></p><p><span style="font-family:arial,helvetica,sans-serif;">A hotel is considering whether to make or buy 3,000 luxury cupcakes for a special function. It can make these for a variable cost per unit of $4.50 per cupcake, and would allocate $4,500 in fixed costs to this order. Alternatively, the hotel can buy the cupcakes from a reputable supplier at a price of $7.0 per cupcake, less 10% discount for the bulk order. In this particular example:</span></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">The hotel’s CTM = $4,500 + ($4.50 × 3,000) = $18,000</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">The hotel’s CTB = ($7.0 × 0.9) × 3,000 = $18,900</span></p></li></ul><p><span style="font-family:arial,helvetica,sans-serif;">Hence, it is cheaper for the hotel to make the cupcakes rather than using the specialist supplier (unless it can offer a discounted price of less than $6.0).</span></p></div><p><span style="font-family:arial,helvetica,sans-serif;">In reality, managers consider both qualitative and quantitative factors before making a final decision to make or buy. Examples of qualitative factors include consideration of the reputation of the third-party provider, lead times for deliveries, and the capacity of employees if in-house production is preferred.</span></p><hr class="hidden"><p><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-youtube fa-lg" style="color: rgb(202, 72, 26);"> </span> Watch this ABC News coverage titled “<a href="https://youtu.be/_RBW2bcMzuU">Foxconn: an exclusive inside look</a>”, which looks at the conditions that Chinese workers put up with in China, and the implications for companies such as Apple and Disney. Do multinational companies, like Apple, have the moral obligation to tackle the problems highlighted in the video?</span></p></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>2. Contribution costing</strong></p></div></div><div class="panel-body"><div><p><img alt="" src="../../../ib/businessmanagement/images/4-marketing/market-stall.jpg" style="width: 280px; height: 186px;"></p><p><strong>Contribution</strong> refers to<strong> </strong>the difference between a firm's sales revenue of a product it sells and the variable costs of production. The surplus is used to "contribute" to the payment of the firm's fixed costs. Any contribution over and above total costs of production is declared as profit for the firm.</p><p>There are two ways to express contribution:</p><ul class="branded"><li><p><strong>Unit contribution</strong> represents the amount of money earned from each unit of the product sold to customers. It is the difference between a firm’s selling price (P) for a product and the average variable cost (AVC) of that product. It represents the amount of money earned from each unit of the product sold to customers.</p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Total contribution</strong> is the unit contribution (P – AVC) multiplied by the quantity sold (Q), i.e., (P – AVC) × Q. This is the amount used to pay fixed costs; any financial surplus that remains becomes profit for the firm.</span></p></li></ul><div><div><div><p>For example, suppose a hot dog stall vendor has total fixed costs per month of $3,000. It sells hot dogs for $7 for which the cost of sales are $4.</p><ul><li><p><span style="font-family:arial,helvetica,sans-serif;">In the above example, for each hot dog sold, the vendor earns $7 – $4 = $3 per unit</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">So, for each hot dog sold, the vendor earns $3 towards paying its total fixed costs.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">The hot dog stall vendor will need to sell 1,000 hot dogs per month in order to pay for the monthly fixed costs, i.e. $3 × 1,000 <span style="font-family:arial,helvetica,sans-serif;">hot dogs </span>= $3,000 OR $3,000 / $3 = 1,000 hot dogs.</span></p></li></ul><div class="box"><p><strong>Formulae</strong></p><ul><li><p><span style="font-family:arial,helvetica,sans-serif;">Total contribution is simply the unit contribution (P – AVC) multiplied by the quantity sold (Q), i.e. <strong>Total contribution = (P – AVC) × Q</strong>.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Total contribution can be used to calculate profit or loss by taking away fixed costs from total contribution, i.e. <strong>Profit = [(P – AVC) × Q] – TFC</strong>.</span></p></li></ul></div></div></div></div><p>In general, a product is worth producing and selling if it earns a positive contribution to fixed costs. Since fixed costs have been paid regardless of the level of output, any positive contribution helps to pay off the firm's overheads. With contribution costing, fixed costs (or overheads) are treated as a <a href="../44565/the-difference-between-cost-profit-centres-1.html" title="New syllabus 2022 » Unit 3 - Finance and Accounts » 3.9 Budgets (HL) » The difference between cost & profit centres">cost centre</a>. <span style="font-family:arial,helvetica,sans-serif;">A <strong>cost centre</strong> is a division of a business that has responsibility for its own operational costs. The cost centre is held accountable for its departmental expenditure. They can help managers to collect and use cost data effectively, thereby having better budgetary control.</span></p><p><span style="font-family:arial,helvetica,sans-serif;">Examples of cost centres in the corporate world include:</span></p><div class="row-fluid"><div class="span6 col-left"><div><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;"></span></p></li><li><p>Administration</p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Customer service</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Finance and accounts</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Human resources</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Legal</span><span style="font-family:arial,helvetica,sans-serif;"></span></p></li></ul></div></div><div class="span6"><div><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;"></span><span style="font-family:arial,helvetica,sans-serif;">Marketing</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Production</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Purchasing</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Research and development (R&D)</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Technical support</span></p></li></ul></div></div></div><hr class="hidden"><p>A <strong>profit centre</strong> is a section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations, which are recorded for budgetary purposes.</p><div><div class="blueBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-window-close-o fa-lg" style="color: rgb(61, 30, 128);"> </span><span style="color:#FF0000;"> Common mistake</span></span></h5><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Contribution </strong>is not the same as <strong>value added</strong>, although the two terms are often confused by students:</span></p><ul><li><p><span style="font-family:arial,helvetica,sans-serif;">Unit contribution = Price minus Average variable cost, i.e. P – AVC</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Value added per unit = Price minus Average total costs, i.e. P – ATC</span></p></li></ul><p><span style="font-family:arial,helvetica,sans-serif;">This means that value added considers both variable and fixed costs of production, whereas unit contribution only considers the cost of sales (COS) or the unit variable costs.</span></p></div></div><p><strong>Contribution costing</strong> is a quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs (both variable and fixed costs). It enables managers to see the financial surplus (contribution) that a firm earns from each unit of product sold and whether that return is sufficient to allow it to earn profit overall, after deducting its fixed costs.</p><p>As an example, suppose a single-product business has the following cost and revenue data:</p><ul><li><p>Selling price per unit = $30</p></li></ul><ul><li><p>Variable cost per unit = $18</p></li></ul><ul><li><p>Contribution per unit = $30 – $18 = $12</p></li></ul><ul><li><p>Units sold = 15,000</p></li></ul><p>Given the contribution per unit is $12, it is possible for the business to increase this by one of two ways:</p><ul><li><p>Raising the selling price above $30</p></li></ul><ul><li><p>Reducing the average variable cost to below $18</p></li></ul><p>Hence, contribution costing enables the business to determine the price it can or should charge for the product.</p><p>Using the contribution formulae above, we can determine total contribution for the firm:</p><p>Total contribution = $12 × 15,000 units = $180,000</p><p>However, note that the total contribution figure is not the same as the overall profit earned by the business, as fixed costs have yet to be accounted for.</p><p>Suppose the business in question has overhead (fixed) costs that total $120,000.</p><p>The firm’s profit is calculated by the difference between its total contribution and its total fixed costs.</p><div class="box"><p style="text-align: center;">Total profit = Total contribution – Total fixed costs</p></div><p>Therefore, the firm’s total profit = $180,000 – $120,000 = $60,000.</p><hr class="hidden"><p>For a multi-product firm, it is possible to calculate the contribution for each product, but not the profit for each product. This is because overhead costs are not directly related to the output of a particular product.</p><p>In the example below, the business sells two different products. Suppose the firm has total fixed costs of $25,000 per month.</p><table border="0" cellpadding="0" cellspacing="3" summary="" width="60%"><tbody><tr><td style="width:40.46%;"><p><strong>Unit variable cost</strong></p></td><td style="width:37.64%;"><p>Product Alpha</p></td><td style="width:19.84%;"><p align="center">$50</p></td></tr><tr><td style="width:40.46%;"></td><td style="width:37.64%;"><p>Product Beta</p></td><td style="width:19.84%;"><p align="center">$70</p></td></tr><tr><td style="width:40.46%;"><p><strong>Selling price </strong></p></td><td style="width:37.64%;"><p>Product Alpha</p></td><td style="width:19.84%;"><p align="center">$220</p></td></tr><tr><td style="width:40.46%;"></td><td style="width:37.64%;"><p>Product Beta</p></td><td style="width:19.84%;"><p align="center">$180</p></td></tr></tbody></table><p>Recall that the unit contribution for a product is the difference between the selling price and the average variable cost. As can be seen below, the unit contribution of Product Alpha is $170 whereas it is lower for Product Beta at $110 each.</p><table border="0" cellpadding="0" cellspacing="3" summary="" width="80%"><tbody><tr><td style="width:30.16%;"><p><strong>Product</strong></p></td><td style="width:17.98%;"><p><strong>Price</strong></p></td><td style="width:25.06%;"><p align="center"><strong>Unit variable cost</strong></p></td><td style="width:24.88%;"><p align="center"><strong>Unit contribution</strong></p></td></tr><tr><td style="width:30.16%;"><p>Alpha</p></td><td style="width:17.98%;"><p>$220</p></td><td style="width:25.06%;"><p align="center">$50</p></td><td style="width:24.88%;"><p align="center">$170</p></td></tr><tr><td style="width:30.16%;"><p>Beta</p></td><td style="width:17.98%;"><p>$180</p></td><td style="width:25.06%;"><p align="center">$70</p></td><td style="width:24.88%;"><p align="center">$110</p></td></tr></tbody></table><p>As mentioned, it is not possible to determine the profits for each product, as fixed costs cannot be directly linked to any of the two different products. The total profit can be calculated as is the total contribution from each product can be determined.</p><p>So, if during the month the firm sells 100 units of Product Alpha and 150 units of Product Beta, the following can be calculated:</p><ul><li><p>Total contribution for Product Alpha = $170 × 100 = $17,000</p></li><li><p>Total contribution for Product Beta = $110 × 150 = $16,500</p></li><li><p>Total contribution for the firm = $17,000 + $16,500 = $33,500</p></li><li><p>Profit for the multi-product firm = $33,500 – $25,000 = <strong>$8,500</strong></p></li></ul><p>Hence, contribution analysis can help a business to determine which products or aspects of its operations are most profitable and which are not (and therefore in need to corrective measures).</p><div class="greenBg"><h5><span style="color:#FF0000;"><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-calculator fa-lg" style="color: rgb(61, 30, 128);"> </span> Worked example</span></span></h5><p>Suppose a toy manufacturer makes four toys that it sells to retailers. The producer has fixed costs of $15,000 per month. The sales and cost details are shown below (figures in $ per month).</p><table border="0" cellpadding="0" cellspacing="0" summary="" width="654"><colgroup><col width="213"><col span="4" width="91"><col width="77"></colgroup><tbody><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><strong>Toy<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>A<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>B<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>C<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>D<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"><strong>Total<span style="mso-spacerun:yes"> </span></strong></td></tr><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><hr class="hidden">Sales revenue<span style="mso-spacerun:yes"> </span></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">20,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">30,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">18,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">22,000</td><td class="xl68" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"></td></tr><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><hr class="hidden">Total variable costs<span style="mso-spacerun:yes"> </span></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">15,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">20,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">12,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">10,000</td><td class="xl68" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"></td></tr><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><hr class="hidden">Contribution<span style="mso-spacerun:yes"> </span></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"></td><td class="xl67" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"></td></tr></tbody></table><p>To work out the profit or loss for the toy manufacturer, it is necessary to calculate the contribution for each product and then the total contribution for the producer. From this, the fixed costs ($15,000) are deducted to calculate the profit or loss. Click on the icon to check the missing figures.</p><table border="0" cellpadding="0" cellspacing="0" summary="" width="654"><colgroup><col width="213"><col span="4" width="91"><col width="77"></colgroup><tbody><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><strong>Toy<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>A<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>B<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>C<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><strong>D<span style="mso-spacerun:yes"> </span></strong></td><td class="xl66" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"><strong>Total<span style="mso-spacerun:yes"> </span></strong></td></tr><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><hr class="hidden">Sales revenue<span style="mso-spacerun:yes"> </span></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">20,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">30,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">18,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">22,000</td><td class="xl68" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"><section class="tib-hiddenbox">90,000</section></td></tr><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><hr class="hidden">Total variable costs<span style="mso-spacerun:yes"> </span></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">15,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">20,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">12,000</td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><hr class="hidden">10,000</td><td class="xl68" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"><section class="tib-hiddenbox">57,000</section></td></tr><tr height="21"><td class="xl65" height="21" style="height:15.5pt;width:160pt; padding-bottom:.75pt;padding-top:.75pt" width="213"><hr class="hidden">Total contribution<span style="mso-spacerun:yes"> </span></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><section class="tib-hiddenbox">5,000</section></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><section class="tib-hiddenbox">10,000</section></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><section class="tib-hiddenbox">6,000</section></td><td class="xl67" style="width: 68pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="91"><section class="tib-hiddenbox">12,000</section></td><td class="xl67" style="width: 58pt; padding-bottom: 0.75pt; padding-top: 0.75pt; text-align: center;" width="77"><section class="tib-hiddenbox">33,000</section></td></tr></tbody></table><p>Therefore, the firm's overall profit is determined by the following calculation (click on the icon logo below).</p><section class="tib-hiddenbox"><ul><li><p>Total contribution = $90,000 minus $57,000 = $33,000</p></li><li><p>Fixed costs = $15,000</p></li><li><p>Total profit = $33,000 minus $15,000 = <strong>$18,000</strong></p></li></ul></section></div><p>Essentially, contribution costing plays an important role in pricing decisions. At the very least, it enables managers to know the minimum price that must be charged in order for the product to earn any positive contribution. This is particularly important for <strong>cost-plus </strong> <strong>pricing </strong>or <strong>mark-up pricing </strong>(see <a href="../42547/452-price-1.html" title="New syllabus 2022 » Unit 4 - Marketing » 4.5 The seven Ps of the marketing mix » 4.5.2 Price">Unit 4.5</a>).</p><p>Using the example from contribution pricing above, managers can choose to appropriation (attribute or split) the fixed costs equally between the four products. This means $3,750 of the total fixed costs is absorbed by each product (i.e., $15,000 / 4 = $3,750). The gives the following results, with all figures in $'000.</p><table border="0" cellpadding="0" cellspacing="0" width="556"><tbody><tr><td style="width:223px;height:42px;"></td><td style="width:67px;height:42px;"><p align="center"><strong>Product A</strong></p></td><td style="width:67px;height:42px;"><p align="center"><strong>Product B</strong></p></td><td style="width:67px;height:42px;"><p align="center"><strong>Product C</strong></p></td><td style="width:67px;height:42px;"><p align="center"><strong>Product D</strong></p></td><td style="width:67px;height:42px;"><p align="center"><strong>Total</strong></p></td></tr><tr><td style="width:223px;height:21px;"><p>Sales revenue</p></td><td style="width:67px;height:21px;"><p align="center">15</p></td><td style="width:67px;height:21px;"><p align="center">50</p></td><td style="width:67px;height:21px;"><p align="center">25</p></td><td style="width:67px;height:21px;"><p align="center">40</p></td><td style="width:67px;height:21px;"><p align="center">130</p></td></tr><tr><td style="width:223px;height:21px;"><p>Variable costs</p></td><td style="width:67px;height:21px;"><p align="center">10</p></td><td style="width:67px;height:21px;"><p align="center">25</p></td><td style="width:67px;height:21px;"><p align="center">15</p></td><td style="width:67px;height:21px;"><p align="center">30</p></td><td style="width:67px;height:21px;"><p align="center">80</p></td></tr><tr><td style="width:223px;height:21px;"><p><strong>Overheads</strong></p></td><td style="width:67px;height:21px;"><p align="center"><strong>3.75</strong></p></td><td style="width:67px;height:21px;"><p align="center"><strong>3.75</strong></p></td><td style="width:67px;height:21px;"><p align="center"><strong>3.75</strong></p></td><td style="width:67px;height:21px;"><p align="center"><strong>3.75</strong></p></td><td style="width:67px;height:21px;"><p align="center"><strong>15</strong></p></td></tr><tr><td style="width:223px;height:21px;"><p>Contribution per product</p></td><td style="width:67px;height:21px;"><p align="center">1.25</p></td><td style="width:67px;height:21px;"><p align="center">21.25</p></td><td style="width:67px;height:21px;"><p align="center">6.25</p></td><td style="width:67px;height:21px;"><p align="center">6.25</p></td><td style="width:67px;height:21px;"><p align="center">35</p></td></tr></tbody></table><p>Notice how the contribution per product is now lower, as each profit centre must absorb some of the overhead costs of the business, as shown below (all figures in $'000).</p><table border="1" cellpadding="0" cellspacing="0" width="595"><tbody><tr><td style="width:300px;height:21px;"><p>Contribution per product<br>(contribution costing)</p></td><td style="width:59px;height:21px;"><p align="center">5</p></td><td style="width:59px;height:21px;"><p align="center">25</p></td><td style="width:59px;height:21px;"><p align="center">10</p></td><td style="width:59px;height:21px;"><p align="center">10</p></td><td style="width:59px;height:21px;"><p align="center">50</p></td></tr><tr><td style="width:300px;height:21px;"><p>Contribution per product<br>(absorption costing)</p></td><td style="width:59px;height:21px;"><p align="center">1.25</p></td><td style="width:59px;height:21px;"><p align="center">21.25</p></td><td style="width:59px;height:21px;"><p align="center">6.25</p></td><td style="width:59px;height:21px;"><p align="center">6.25</p></td><td style="width:59px;height:21px;"><p align="center">35</p></td></tr></tbody></table> <div class="yellowBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"><span class="snippet-fa fa fa-lightbulb-o fa-lg" style="color: rgb(61, 30, 128);"> </span> Top tip!</span></span></h5><p><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"></span></span>Based on our distinction between "price" (what the customer pays) and "cost" (what the business pays), make sure you do not confuse <strong>contribution pricing</strong> and <strong>contribution costing</strong> as they are different. Contribution pricing is part of Unit 4.5 as a <a href="../42547/452-price-1.html" title="New syllabus 2022 » Unit 4 - Marketing » 4.5 The seven Ps of the marketing mix » 4.5.2 Price">pricing method</a>, whereas contribution costing is part of the BMT and used as a method to allocate a firm's indirect costs.</p><p>Essentially, contribution costing is a business management <strong>tool </strong>that can be useful for decision-making (such as setting annual budgets between different functional areas of a business) whereas contribution pricing is a <strong>strategy </strong>that the business can use (such as specific pricing methods).</p><p>Whilst there is some overlap between these two terms, if you are able to distinguish between 'cost' and 'price', the distinction should be more clear.</p></div></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>3. Absorption costing</strong></p></div></div><div class="panel-body"><p><img alt="" src="../../../ib/businessmanagement/images/3-finance/electricity-costs-2.jpg" style="width: 300px; height: 169px;"></p><p>Contribution costing is based on the principle that a cost (such as staff wages or raw material costs) is directly attributable to a product. However, the technique does not apportion fixed costs (overheads), which must be accounted for before declaring a profit or loss. Nevertheless, in reality fixed costs and overheads (such as insurance, lighting, depreciation, and rent) are not easily or objectively apportioned to any specific cost centre or profit centre. Absorption costing seeks to apportion these fixed costs between a firm's cost or profit centres.</p><p><strong>Absorption costing</strong> is a quantitative method of calculating the cost of a product by taking into account both indirect expenses (overhead costs) as well as direct costs (cost of sales), i.e., it calculates the total cost of producing a product. The criteria use to apportion overheads for each cost or profit centre commonly includes floor space, sales revenue, or the number of staff in each division (to allocate rental costs). Another example is to use the value of machinery to allocate depreciation costs.</p><p>Suppose a business operates three separate divisions (or departments) as profit centres, with the following cost and revenue information:</p><table border="0" cellpadding="0" cellspacing="0" width="588"><colgroup><col width="195"><col span="3" width="131"></colgroup><tbody><tr height="22"><td class="xl66" height="22" style="height:16.5pt;width:147pt" width="195"><strong><span lang="EN-HK">Profit centres</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department A</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department B</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department C</span></strong></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Sales revenue</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">300,000</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">250<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">200<span lang="EN-HK">,000</span></span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Direct costs</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">165<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">125<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">120<span lang="EN-HK">,000</span></span></td></tr></tbody></table><hr class="hidden"><p>Using contribution analysis, we can determine the total contribution for each profit centre:</p><table border="0" cellpadding="0" cellspacing="0" width="719"><colgroup><col width="195"><col span="4" width="131"></colgroup><tbody><tr height="22"><td class="xl66" height="22" style="height:16.5pt;width:147pt" width="195"><strong><span lang="EN-HK">Profit centres</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department A</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department B</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department C</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong>Total</strong></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Sales revenue</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">300,000</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">250<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">200<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">750<span lang="EN-HK">,000</span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Direct costs</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">165<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">125<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">120<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">410<span lang="EN-HK">,000</span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Contribution</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">135<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">125<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">80<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">340</span><span lang="EN-HK">,000</span></strong></td></tr></tbody></table><hr class="hidden"><p>Now, suppose the firm's overheads comprise of $200,000 for rent and $100,000 for administrative costs. The firm's total fixed costs are therefore $300,000. Contribution analysis shows that the total profit is therefore $340,000 <span lang="EN-US" style="font-size:12.0pt;line-height:
115%;font-family:"Arial",sans-serif;mso-fareast-font-family:PMingLiU;
mso-fareast-theme-font:minor-fareast;mso-ansi-language:EN-US;mso-fareast-language:
EN-US;mso-bidi-language:AR-SA">– </span> ($200,000 + 100,000) = $40,000.</p><p>However, absorption costing would enable managers to have better insight into how each department or division of the business is affected by overhead costs. Additional data for the aforementioned firm are shown below.</p><table border="0" cellpadding="0" cellspacing="0" width="719"><colgroup><col width="195"><col span="4" width="131"></colgroup><tbody><tr height="21"><td class="xl66" height="21" style="height:15.5pt;width:147pt" width="195"><strong>Measure</strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department A</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department B</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department C</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong>Total</strong></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Floor space<br>(sq metres)</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">50</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">80</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">70</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">200</td></tr><tr><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Employees<br>(number of)</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">40</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">35</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">25</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">100</td></tr></tbody></table><hr class="hidden"><p>With this additional information, the overhead costs (rent and administrative costs) can be allocated based on the proportion of the costs attributed by each department.</p><table border="0" cellpadding="0" cellspacing="0" width="719"><colgroup><col width="195"><col span="4" width="131"></colgroup><tbody><tr height="21"><td class="xl66" height="21" style="height:15.5pt;width:147pt" width="195"><strong><span lang="EN-HK">Rent</span>al costs</strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department A</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department B</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department C</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong>Total</strong></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Floor space<br>(sq metres)</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">50</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">80</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">70</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">200</td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Floor space<br>(% of total)</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">25%</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">40%</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">35%</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">100%</td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Allocation of rent*</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">50,000</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">80,000</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">70,000</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">200,000</td></tr></tbody></table><p>* The allocation of rent is determined by multiplying the overhead charges ($200,000) by the percentage that each department accounts for. For, for example, Department A accounts for 25% of the total floor space (50 sq m<sup>2</sup> as a percentage of 200 sq m<sup>2</sup>). Hence 25% of the rental costs are absorbed by Department A, i.e. $200,000 × 0.25 = $50,000.</p><p>We can also allocate the administrative charges in the same way, based on the number of employees in each department. In theory, larger departments (as measured by the number of employees) contribute towards a larger proportion of the administrative costs of a business.</p><table border="0" cellpadding="0" cellspacing="0" width="719"><colgroup><col width="195"><col span="4" width="131"></colgroup><tbody><tr height="21"><td class="xl66" height="21" style="height:15.5pt;width:147pt" width="195"><strong><span lang="EN-HK">Administrative costs</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department A</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department B</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department C</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong>Total</strong></td></tr><tr height="21"><td class="xl66" height="21" style="height:15.5pt;border-top:none; width:147pt" width="195">Employees (number of)</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">40</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">35</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">25</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">100</td></tr><tr height="21"><td class="xl66" height="21" style="height:15.5pt;border-top:none; width:147pt" width="195">Employees (% of total)</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">40%</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">35%</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">25%</td><td class="xl69" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">100%</td></tr><tr height="21"><td class="xl66" height="21" style="height:15.5pt;border-top:none; width:147pt" width="195">Allocation of administrative costs*</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">$40,000</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">$35,000</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">$25,000</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">$100,000</td></tr></tbody></table><p> * In the case of Department B, with 35 employees out of the total workforce of 100 people, the department is allocated or absorbs 35% of the total administrative costs. Hence, it is allocated $100,000 × 0.35 = $35,000.</p><hr class="hidden"><p>The final stage in absorption costing is to enter the figures for allocated overhead costs to each department:</p><table border="0" cellpadding="0" cellspacing="0" width="719"><colgroup><col width="195"><col span="4" width="131"></colgroup><tbody><tr height="22"><td class="xl66" height="22" style="height:16.5pt;width:147pt" width="195"><strong><span lang="EN-HK">Profit centres</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department A</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department B</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong><span lang="EN-HK">Department C</span></strong></td><td class="xl67" style="border-left: medium none; width: 99pt; text-align: center;" width="131"><strong>Total</strong></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Sales revenue</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">300,000</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">250<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">200<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">750<span lang="EN-HK">,000</span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Direct costs</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">165<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">125<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">120<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131">410<span lang="EN-HK">,000</span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195">Contribution</td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">135<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">125<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">80<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">340<span lang="EN-HK">,000</span></span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Allocation of rent</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">50<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">80<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">70<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">200<span lang="EN-HK">,000</span></span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Allocation of admin costs</span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">40<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">35<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">25<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK" style="mso-themecolor:background1;mso-themeshade:128">100<span lang="EN-HK">,000</span></span></td></tr><tr height="22"><td class="xl66" height="22" style="height:16.5pt;border-top:none; width:147pt" width="195"><span lang="EN-HK">Profit per department<sup>^</sup></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">45<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">10<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">-15<span lang="EN-HK">,000</span></span></td><td class="xl65" style="border-top: medium none; border-left: medium none; width: 99pt; text-align: center;" width="131"><span lang="EN-HK">40<span lang="EN-HK">,000</span></span></td></tr></tbody></table><p><span lang="EN-HK"><sup>^</sup></span> The profit or loss earned from each department is calculated by the formula: Contribution minus Overheads. So, for example, in the case of Department C, the loss is determined as $80,000 – ($70,000 + $25,000) = -$15,000. This means that despite the department earning a positive contribution of $80,000 the department actually makes a loss after rent and administrative charges are accounted for.</p><p>From the above analysis and example, it can be seen that Department A is the most profitable division for the business, whereas there may be some financial concerns revealed for Department C.</p><hr class="hidden"><p>Although absorption costing is more complex and time consuming than using contribution costing, it is more representative of the situation in reality as fixed costs still need to be accounted for in order to declare a profit or loss. As such, the cost per unit of output is likely to be more accurate if managers use absorption costing. This is particularly important is the firm choosing a <a href="../42547/452-price-1.html" title="New syllabus 2022 » Unit 4 - Marketing » 4.5 The seven Ps of the marketing mix » 4.5.2 Price">cost-plus</a> (mark-up) pricing policy.</p><p>However, note that the criteria used to allocate or apportion overhead costs is still arbitrary and subjective to some extent so can lead to some discrepancies and inaccuracies in the results.</p></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Contribution - Key terms</strong></p></div></div><div class="panel-body"><div><ul class="branded"><li><p><strong>Absorption costing</strong> is a quantitative method of calculating the cost of a product by taking into account both indirect expenses (overhead costs) as well as direct costs (cost of sales).</p></li><li><p><strong>Contribution</strong> refers to<strong> </strong>the difference between a firm's sales revenue of a product it sells and the variable costs of production.</p></li><li><p><strong>Contribution costing</strong> is a quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs (both variable and fixed costs).</p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">A <strong>cost centre</strong> is a division of a business that has responsibility for its own operational costs.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">The <strong>cost to buy</strong> (CTB) method calculates the total cost of subcontracting production to a third-party supplier.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><span style="font-family:arial,helvetica,sans-serif;">The <strong>cost to make </strong>(CTM) refers to the total costs of producing a good or service in-house, rather than using a third-party supplier.</span></span></p></li><li><p><strong>Make or buy analysis </strong>is a quantitative tool that involves a business choosing between making (manufacturing) a product in-house or to purchase it from an external provider (outsourced supplier).</p></li><li><p>A <strong>profit centre</strong> is a section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations, which are recorded for budgetary purposes.</p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Total contribution</strong> is the unit contribution (P – AVC) multiplied by the quantity sold (Q), i.e., (P – AVC) × Q. This is the amount used to pay fixed costs; any financial surplus that remains becomes profit for the firm.</span></p></li><li><p><strong>Unit contribution</strong> represents the amount of money earned from each unit of the product sold to customers. It is the difference between a firm’s selling price (P) for a product and the average variable cost (AVC) of that product.</p></li></ul></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Contribution - Multiple Choice Questions Quiz</strong></p></div></div><div class="panel-body"><div><p><img alt="" src="../../../igcse/economics/exams/mcq-1.jpg" style="width: 300px; height: 278px;"></p><p>To test your understanding of this business management tool (Contribution), have a go at the following multiple choice questions. To support your revision, a brief explanation is provided for the answer.</p><div class="tib-quiz" data-quiz-id="4133" data-structure="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" data-score-answers="6d4a526a457a48584f763758344a7649472f76324c53614b78524c393439595570496d5a5971374b38686f3d"><div class="exercise"><div class="q-question"><p>What is the main purpose of a make or buy analysis?</p></div><div class="q-answer"><p><label class="radio" data-answer="3e601b737e407b091f9eb96e74eb6640"><input type="radio"><span> To decide whether to outsource or insource production</span></label></p><p><label class="radio" data-answer="9567e243cebfe044ff2d643e47ac3a30"><input type="radio"><span> To assess whether the business has sufficient capacity and expertise</span></label></p><p><label class="radio" data-answer="7077b123a345fd2c4928d93f04e746e7"><input type="radio"><span> To compare the cost to make and cost to buy</span></label></p><p><label class="radio" data-answer="36379fa2625e9bbcb5aea954689b3ccb"><input type="radio"><span> To determine if an organization should make a product in-house or purchase it from an external provider</span></label></p></div><div class="q-explanation"><p>As the name suggests, a make or buy analysis enables a firm to see whether it should make a product in-house or purchase it from an external provider.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What are two quantitative techniques used to decide whether to make or buy?</p></div><div class="q-answer"><p><label class="radio" data-answer="4c734e5f25f7476dd16a5003e0971e23"><input type="radio"><span> Control and command</span></label></p><p><label class="radio" data-answer="af3f04b6dc7c5b89b12ea7ce83d55608"><input type="radio"><span> Negotiation and bargaining power</span></label></p><p><label class="radio" data-answer="0c7de4de810fa8dfa9780e5c39d5c9b9"><input type="radio"><span> Cost to make and cost to buy</span></label></p><p><label class="radio" data-answer="602b95862bb9352857745698f6b799af"><input type="radio"><span> Capacity and expertise</span></label></p></div><div class="q-explanation"><p>The cost to make (CTB) and cost to buy (CTB) enable a firm to determine whether to make a product (if the CTM < CTB) or to buy it from another provider (if the CTB < CTM).</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the purpose of a business considering a cost to buy (CTB) decision?</p></div><div class="q-answer"><p><label class="radio" data-answer="7077b123a345fd2c4928d93f04e746e7"><input type="radio"><span> To compare the cost to make and cost to buy</span></label></p><p><label class="radio" data-answer="d6464dbeb8f304740eb47ef779e77b76"><input type="radio"><span> To decide whether to outsource or insource</span></label></p><p><label class="radio" data-answer="dfcdbaf08be50cb2ab12b4cc41ded5e1"><input type="radio"><span> To calculate the total cost of subcontracting production to a third-party supplier</span></label></p><p><label class="radio" data-answer="9567e243cebfe044ff2d643e47ac3a30"><input type="radio"><span> To assess whether the business has sufficient capacity and expertise</span></label></p></div><div class="q-explanation"><p>A cost to buy (CTB) decision involves the business working out the total cost of using a third-party producer of a good or provider of a particular service.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What are the correct combination of factors that businesses need to consider when making a "make or buy" decision?</p></div><div class="q-answer"><p><label class="radio" data-answer="68700ab832fd7e7ed7d78254cb849802"><input type="radio"><span> Control and customer perception</span></label></p><p><label class="radio" data-answer="af3f04b6dc7c5b89b12ea7ce83d55608"><input type="radio"><span> Negotiation and bargaining power</span></label></p><p><label class="radio" data-answer="55f7facdecde6882b53e07f479c81367"><input type="radio"><span> Fixed and variable costs</span></label></p><p><label class="radio" data-answer="602b95862bb9352857745698f6b799af"><input type="radio"><span> Capacity and expertise</span></label></p></div><div class="q-explanation"><p>When deciding whether to have in-house production or to outsource this, a business needs to consider whether it has capacity to expand and the necessary expertise to do so.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the primary benefit of making a product in-house?</p></div><div class="q-answer"><p><label class="radio" data-answer="9d45231d99b1154ca33b0a06f3f0410f"><input type="radio"><span> It allows the business to have better negotiation and bargaining power</span></label></p><p><label class="radio" data-answer="652f6b4a09bdb3904d7e4cc0556702f2"><input type="radio"><span> It creates flexibility and capacity for the business</span></label></p><p><label class="radio" data-answer="5c3fb1319ff3984514bd648534df6ed9"><input type="radio"><span> It is always more cost-effective to have in-house production</span></label></p><p><label class="radio" data-answer="702d7b21b86662a84c033224385c760a"><input type="radio"><span> It allows the business to have improved control of the production process</span></label></p></div><div class="q-explanation"><p>Choosing to have in-house production enables the business to have improved control of the production process, whereas the control is diluted if outsourcing or subcontracting are used.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is an example of a service that a large IB World School in unlikely outsource?</p></div><div class="q-answer"><p><label class="radio" data-answer="bdea34824ddd5487b2d3a3ad5b068c44"><input type="radio"><span> Security services</span></label></p><p><label class="radio" data-answer="12364dfa6166fc0194de7332fab7ce7d"><input type="radio"><span> Catering services</span></label></p><p><label class="radio" data-answer="386533b1dd6d0732cfad59e8f631e35a"><input type="radio"><span> Teaching</span></label></p><p><label class="radio" data-answer="880e0be9b2cac8d06f8b437c98495b96"><input type="radio"><span> Market research</span></label></p></div><div class="q-explanation"><p>Teaching is (should be) delivered in-house, rather than outsourced (except in exceptional circumstances). It is important that appropriately qualified and experienced teachers delivery the IB curriculum in IB World Schools.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>How are the cost to make (CTM) and cost to buy (CTB) methods used to decide whether to make or buy?</p></div><div class="q-answer"><p><label class="radio" data-answer="81ab7b35757ce4b09c9dad4b5298ffaa"><input type="radio"><span> If the CTM < CTB, the firm will use outsourcing or subcontracting</span></label></p><p><label class="radio" data-answer="72374dcf35430299b5646310c6fcd9b2"><input type="radio"><span> If the CTM > CTB, the firm will use outsourcing or subcontracting</span></label></p><p><label class="radio" data-answer="41c537102da08a3535249f22f8c2bd83"><input type="radio"><span> If the CTB < CTM, the firm will use insourcing (in-house production)</span></label></p><p><label class="radio" data-answer="c55fba6773288ae485baf4fb526c4f64"><input type="radio"><span> If the CTB = CTM, the firm will use insourcing (in-house production)</span></label></p></div><div class="q-explanation"><p>If the CTM > CTB, this means it is relatively cheaper to make (in-house provision) than to buy (from an outsourced provider).</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the formula for calculating unit contribution?</p></div><div class="q-answer"><p><label class="radio" data-answer="3302b03c029005f9890e6f190c6a6911"><input type="radio"><span> P + AVC</span></label></p><p><label class="radio" data-answer="54ad9aba647a8fc32872d14a6818afce"><input type="radio"><span> AVC – P</span></label></p><p><label class="radio" data-answer="5a68a34643e3606fb69a5da0773c67f3"><input type="radio"><span> P – AVC</span></label></p><p><label class="radio" data-answer="024dc5ff3514e02269a16316e14a0322"><input type="radio"><span> (P – AVC) × Q</span></label></p></div><div class="q-explanation"><p>Unit contribution if the difference between the selling price (P) and the average variable cost (AVC) of making or providing that product.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the disadvantage of outsourcing a product to a third-party supplier?</p></div><div class="q-answer"><p><label class="radio" data-answer="2f74bc6cfbe1991277ad4e8cbd911b95"><input type="radio"><span> Lack of control over costs and quality</span></label></p><p><label class="radio" data-answer="730e6ae7c7c4958f8cc21ef2a518048c"><input type="radio"><span> Lack of expertise to make the products in-house</span></label></p><p><label class="radio" data-answer="71eb10c11dbeade78dc0b7d02f40e26d"><input type="radio"><span> Lack of negotiation (bargaining power) as a customer</span></label></p><p><label class="radio" data-answer="53440bb14034250788fab6e21fb6ed48"><input type="radio"><span> Lack of flexibility and capacity to deal with unexpected demand</span></label></p></div><div class="q-explanation"><p>Outsourcing production of a product to a third-party supplier means some loss of control of the production process, especially if it lacks negotiation power asa customer.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the formula used to calculate the cost to buy (CTB) a product from a supplier?</p></div><div class="q-answer"><p><label class="radio" data-answer="ac0db8cf399b73065191b73ffad9cb59"><input type="radio"><span> CTB = Total costs of buying a product from a supplier</span></label></p><p><label class="radio" data-answer="0dec6cd8fbba3b48909a5175106e8b38"><input type="radio"><span> CTB = Total variable cost + Total fixed costs</span></label></p><p><label class="radio" data-answer="51114a3ac1280fbe805416586e8a2e2e"><input type="radio"><span> CTB = Price – Average variable cost</span></label></p><p><label class="radio" data-answer="cbc6d92246c4f29b2bae2344b8aa9798"><input type="radio"><span> CTB = Average costs + Variable costs</span></label></p></div><div class="q-explanation"><p>The cost to buy (CTB) is the total costs of buying a product from a supplier. This does not typically incur any fixed costs.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the formula used to calculate the cost to make (CTM) a product in-house?</p></div><div class="q-answer"><p><label class="radio" data-answer="e2b650a46e3bf6532489c7b624b998fb"><input type="radio"><span> CTM = Total costs of buying a product from a supplier</span></label></p><p><label class="radio" data-answer="7668d7557c06ea72717d6ac87e56209f"><input type="radio"><span> CTM = Total costs of production - Total costs of buying a product from a supplier</span></label></p><p><label class="radio" data-answer="e96048f67e15965b6c0046c38a1de896"><input type="radio"><span> CTM = Total costs of production = Total fixed costs + Total variable costs</span></label></p><p><label class="radio" data-answer="43b8aa9cc84137480b55dc60f7122394"><input type="radio"><span> CTM = Total costs of production + Total costs of buying a product from a supplier</span></label></p></div><div class="q-explanation"><p>The cost of make (CTB) a product in-house will include all direct costs associated with the output of the product, i.e., fixed and variable costs that are allocated to the production.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the formula for unit contribution?</p></div><div class="q-answer"><p><label class="radio" data-answer="9d4ea33b7cd08e8504c672705364d4dc"><input type="radio"><span> Unit contribution = Total costs of buying a product from a supplier</span></label></p><p><label class="radio" data-answer="ffbfcce9fe7af2ff2df329c7e0188bef"><input type="radio"><span> Unit contribution = Total costs of production = Total fixed costs + Total variable costs</span></label></p><p><label class="radio" data-answer="846f7c867e00d8631d185ecd16e7d74d"><input type="radio"><span> Unit contribution = Total costs of production - Total costs of buying a product from a supplier</span></label></p><p><label class="radio" data-answer="ca2cd214c9ab9f93ab2d2f4004ae0ed0"><input type="radio"><span> Unit contribution = (P – AVC) × Q</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the formula for total contribution? A. B. D. </p></div><div class="q-answer"><p><label class="radio" data-answer="262f024a4a9d4438e5d29e5ccee31188"><input type="radio"><span> Total contribution = Total costs of production = Total fixed costs + Total variable costs</span></label></p><p><label class="radio" data-answer="374539eec3e9bee3f62049271ef62bf9"><input type="radio"><span> Total contribution = Total costs of buying a product from a supplier</span></label></p><p><label class="radio" data-answer="9d19c807e37307aa96e2fef7d288f627"><input type="radio"><span> Total contribution = (P – AVC) × Q </span></label></p><p><label class="radio" data-answer="d0e95a6e2d712acee9a118d81b4b8cf2"><input type="radio"><span> Total contribution = Total costs of production - Total costs of buying a product from a supplier</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is unit contribution?</p></div><div class="q-answer"><p><label class="radio" data-answer="11f3b07f79fb9e62162523ec7438283f"><input type="radio"><span> The amount of money earned from each unit of the product sold to customers</span></label></p><p><label class="radio" data-answer="bb215cbb2052a75c31457001c3d5db49"><input type="radio"><span> A section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations</span></label></p><p><label class="radio" data-answer="ab55e8e39e03deb6d94708d66c67aaa9"><input type="radio"><span> The unit contribution (P – AVC) multiplied by the quantity sold (Q)</span></label></p><p><label class="radio" data-answer="088a35d9cfa75f701a2b13a8268f48c8"><input type="radio"><span> The difference between a firm's sales revenue of a product it sells and the variable costs of production</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is a cost centre?</p></div><div class="q-answer"><p><label class="radio" data-answer="c133d75d2d902f02b59eb84d328ef299"><input type="radio"><span> A division of a business that has responsibility for its own expenditure</span></label></p><p><label class="radio" data-answer="6d76d79db106b7eea574b6709827a273"><input type="radio"><span> A division of a business that has responsibility for its own profits</span></label></p><p><label class="radio" data-answer="1fd94cae23f789c007efbc1dbb8eeea6"><input type="radio"><span> A division of a business that has responsibility for its own operational costs</span></label></p><p><label class="radio" data-answer="5cbdd8644c0eb9cf54755e555a50f640"><input type="radio"><span> A division of a business that has responsibility for its own revenue</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is a profit centre?</p></div><div class="q-answer"><p><label class="radio" data-answer="c133d75d2d902f02b59eb84d328ef299"><input type="radio"><span> A division of a business that has responsibility for its own expenditure </span></label></p><p><label class="radio" data-answer="5cbdd8644c0eb9cf54755e555a50f640"><input type="radio"><span> A division of a business that has responsibility for its own revenue</span></label></p><p><label class="radio" data-answer="6d76d79db106b7eea574b6709827a273"><input type="radio"><span> A division of a business that has responsibility for its own profits</span></label></p><p><label class="radio" data-answer="1fd94cae23f789c007efbc1dbb8eeea6"><input type="radio"><span> A division of a business that has responsibility for its own operational costs</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the difference between a cost centre and a profit centre?</p></div><div class="q-answer"><p><label class="radio" data-answer="a449a19c2c3bb36bcd0985afe6d28c49"><input type="radio"><span> A cost centre has responsibility for its own operational costs, while a profit centre has responsibility for its own profits.</span></label></p><p><label class="radio" data-answer="9d3ba34d3c62f4cfe037a7d95eba6c2e"><input type="radio"><span> A cost centre has responsibility for its own revenue, while a profit centre has responsibility for its own profits.</span></label></p><p><label class="radio" data-answer="d57396c232e887a007ac16ca1ac85d45"><input type="radio"><span> A cost centre has responsibility for its own expenditure, while a profit centre has responsibility for its own operational costs.</span></label></p><p><label class="radio" data-answer="1bd5f0dd007b3ea8844a8f56216ba96d"><input type="radio"><span> A cost centre has responsibility for its own profits, while a profit centre has responsibility for its own expenditure.</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>When is a product worth producing and selling?</p></div><div class="q-answer"><p><label class="radio" data-answer="9b79ea6e2811ba83a6bf019927d363f4"><input type="radio"><span> If it earns a negative contribution to variable costs</span></label></p><p><label class="radio" data-answer="06b41c59dc9c1f1a52be98761be5bbd4"><input type="radio"><span> If it earns a negative contribution to fixed costs</span></label></p><p><label class="radio" data-answer="58aa35f97e3456778d0baf10b00bf81f"><input type="radio"><span> If it earns a positive contribution to variable costs</span></label></p><p><label class="radio" data-answer="dcb8208329d959b73dc9078410d196ce"><input type="radio"><span> If it earns a positive contribution to fixed costs</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the purpose of contribution costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="4ab7c155b6c8822c1cb962150670b165"><input type="radio"><span> To pay overhead costs</span></label></p><p><label class="radio" data-answer="71df1d33e41be41199e3f9b291d9f411"><input type="radio"><span> To pay fixed costs</span></label></p><p><label class="radio" data-answer="2a889b8266a617cd8d56d52f98fb620b"><input type="radio"><span> To pay operating costs</span></label></p><p><label class="radio" data-answer="abab75ab07fe94d303ddd4ea6556c1aa"><input type="radio"><span> To pay variable costs</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the purpose of contribution costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="1d433af7e53a3fafea06a567224b5aca"><input type="radio"><span> To apportion fixed costs between a firm's cost or profit centres</span></label></p><p><label class="radio" data-answer="2090a56bea1b1b4b1a8041a287b92a49"><input type="radio"><span> To calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="4be7f1fd5b52db5af5230a3fbf705d40"><input type="radio"><span> To calculate the total cost of producing a product</span></label></p><p><label class="radio" data-answer="dd31c4bfd0a993b2983dc1dd89fbe8e7"><input type="radio"><span> To determine which products or aspects of operations are most profitable</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the difference between contribution costing and absorption costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="1532e4a3dca7e3b3bbe0a94f7f86c2ca"><input type="radio"><span> Absorption costing only takes into account direct costs whereas contribution costing takes into account indirect expenses</span></label></p><p><label class="radio" data-answer="c2c96fdd249df38e55b85cf09b00e3e9"><input type="radio"><span> Absorption costing does not apportion fixed costs whereas contribution costing does</span></label></p><p><label class="radio" data-answer="39961b37bb8f8f55b34370cf18d0ff13"><input type="radio"><span> Contribution costing does not apportion fixed costs whereas absorption costing does</span></label></p><p><label class="radio" data-answer="3b1eab6fbecdc9f4dda9223461636bff"><input type="radio"><span> Contribution costing only takes into account direct costs whereas absorption costing takes into account indirect expenses</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p> What is the main difference between contribution costing and absorption costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="1532e4a3dca7e3b3bbe0a94f7f86c2ca"><input type="radio"><span> Absorption costing only takes into account direct costs whereas contribution costing takes into account indirect expenses</span></label></p><p><label class="radio" data-answer="99af92b3d2b0811cf1b853b23fa98b79"><input type="radio"><span> Contribution costing takes into account both direct and indirect costs whereas absorption costing only takes into account direct costs</span></label></p><p><label class="radio" data-answer="b8185fc8fed0e00e782ef3e4c8a0072d"><input type="radio"><span> Absorption costing takes into account both direct and indirect costs whereas contribution costing only takes into account direct costs.</span></label></p><p><label class="radio" data-answer="3b1eab6fbecdc9f4dda9223461636bff"><input type="radio"><span> Contribution costing only takes into account direct costs whereas absorption costing takes into account indirect expenses</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What kind of information can be obtained from contribution analysis?</p></div><div class="q-answer"><p><label class="radio" data-answer="93df40fed003b8617cef6485a6a64394"><input type="radio"><span> The total cost of producing a product</span></label></p><p><label class="radio" data-answer="8513ffa1768a42c00fb194321a863f60"><input type="radio"><span> The number of staff in each division</span></label></p><p><label class="radio" data-answer="38a85cab6fc44212ebf28184e38d0cfe"><input type="radio"><span> The total profit for each product</span></label></p><p><label class="radio" data-answer="b148bc6d7fd5506c6efa51c895258349"><input type="radio"><span> The minimum price that must be charged for a product to earn any positive contribution</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the purpose of absorption costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="1d433af7e53a3fafea06a567224b5aca"><input type="radio"><span> To apportion fixed costs between a firm's cost or profit centres</span></label></p><p><label class="radio" data-answer="2090a56bea1b1b4b1a8041a287b92a49"><input type="radio"><span> To calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="04c9a02926dfca91e8f2af9f45b09d49"><input type="radio"><span> To calculate the total profit for each product</span></label></p><p><label class="radio" data-answer="dd31c4bfd0a993b2983dc1dd89fbe8e7"><input type="radio"><span> To determine which products or aspects of operations are most profitable</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the criteria used to apportion overheads for each cost or profit centre?</p></div><div class="q-answer"><p><label class="radio" data-answer="8513ffa1768a42c00fb194321a863f60"><input type="radio"><span> The number of staff in each division</span></label></p><p><label class="radio" data-answer="ce633aef903bcbdd0a3f4a218db88bd7"><input type="radio"><span> The value of machinery to allocate depreciation costs</span></label></p><p><label class="radio" data-answer="93df40fed003b8617cef6485a6a64394"><input type="radio"><span> The total cost of producing a product</span></label></p><p><label class="radio" data-answer="38a85cab6fc44212ebf28184e38d0cfe"><input type="radio"><span> The total profit for each product</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the purpose of contribution costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="4be7f1fd5b52db5af5230a3fbf705d40"><input type="radio"><span> To calculate the total cost of producing a product</span></label></p><p><label class="radio" data-answer="1d433af7e53a3fafea06a567224b5aca"><input type="radio"><span> To apportion fixed costs between a firm's cost or profit centres </span></label></p><p><label class="radio" data-answer="2090a56bea1b1b4b1a8041a287b92a49"><input type="radio"><span> To calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="dd31c4bfd0a993b2983dc1dd89fbe8e7"><input type="radio"><span> To determine which products or aspects of operations are most profitable</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is not possible to determine using contribution costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="38a85cab6fc44212ebf28184e38d0cfe"><input type="radio"><span> The total profit for each product</span></label></p><p><label class="radio" data-answer="b148bc6d7fd5506c6efa51c895258349"><input type="radio"><span> The minimum price that must be charged for a product to earn any positive contribution</span></label></p><p><label class="radio" data-answer="8513ffa1768a42c00fb194321a863f60"><input type="radio"><span> The number of staff in each division</span></label></p><p><label class="radio" data-answer="93df40fed003b8617cef6485a6a64394"><input type="radio"><span> The total cost of producing a product</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What kind of information can be obtained from absorption costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="b148bc6d7fd5506c6efa51c895258349"><input type="radio"><span> The minimum price that must be charged for a product to earn any positive contribution</span></label></p><p><label class="radio" data-answer="93df40fed003b8617cef6485a6a64394"><input type="radio"><span> The total cost of producing a product</span></label></p><p><label class="radio" data-answer="38a85cab6fc44212ebf28184e38d0cfe"><input type="radio"><span> The total profit for each product</span></label></p><p><label class="radio" data-answer="8513ffa1768a42c00fb194321a863f60"><input type="radio"><span> The number of staff in each division</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the purpose of absorption costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="4be7f1fd5b52db5af5230a3fbf705d40"><input type="radio"><span> To calculate the total cost of producing a product</span></label></p><p><label class="radio" data-answer="1d433af7e53a3fafea06a567224b5aca"><input type="radio"><span> To apportion fixed costs between a firm's cost or profit centres</span></label></p><p><label class="radio" data-answer="dd31c4bfd0a993b2983dc1dd89fbe8e7"><input type="radio"><span> To determine which products or aspects of operations are most profitable</span></label></p><p><label class="radio" data-answer="2090a56bea1b1b4b1a8041a287b92a49"><input type="radio"><span> To calculate how many items need to be sold to cover all the firm’s costs</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is the definition of absorption costing?</p></div><div class="q-answer"><p><label class="radio" data-answer="a8dad5ed15178489d25197a11642c4ed"><input type="radio"><span> A quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="2e4a6f0f6b28c221d4733626c25bd16b"><input type="radio"><span> A quantitative method of calculating the cost of a product by taking into account both indirect expenses and direct costs</span></label></p><p><label class="radio" data-answer="1fd94cae23f789c007efbc1dbb8eeea6"><input type="radio"><span> A division of a business that has responsibility for its own operational costs</span></label></p><p><label class="radio" data-answer="088a35d9cfa75f701a2b13a8268f48c8"><input type="radio"><span> The difference between a firm's sales revenue of a product it sells and the variable costs of production</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p> What is the cost to buy (CTB) method? A. B. C. D. </p></div><div class="q-answer"><p><label class="radio" data-answer="a8dad5ed15178489d25197a11642c4ed"><input type="radio"><span> A quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="4431baa69f8adc07faa616b52484e2ce"><input type="radio"><span> A quantitative tool that involves a business choosing between making (manufacturing) a product in-house or to purchase it from an external provider (outsourced supplier)</span></label></p><p><label class="radio" data-answer="b47641c33ff0d6794b7c2f5943e661a2"><input type="radio"><span> The total cost of subcontracting production to a third-party supplier</span></label></p><p><label class="radio" data-answer="bb215cbb2052a75c31457001c3d5db49"><input type="radio"><span> A section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is make or buy analysis?</p></div><div class="q-answer"><p><label class="radio" data-answer="4431baa69f8adc07faa616b52484e2ce"><input type="radio"><span> A quantitative tool that involves a business choosing between making (manufacturing) a product in-house or to purchase it from an external provider (outsourced supplier)</span></label></p><p><label class="radio" data-answer="a8dad5ed15178489d25197a11642c4ed"><input type="radio"><span> A quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="bb215cbb2052a75c31457001c3d5db49"><input type="radio"><span> A section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations</span></label></p><p><label class="radio" data-answer="b47641c33ff0d6794b7c2f5943e661a2"><input type="radio"><span> The total cost of subcontracting production to a third-party supplier</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is make or buy analysis?</p></div><div class="q-answer"><p><label class="radio" data-answer="4431baa69f8adc07faa616b52484e2ce"><input type="radio"><span> A quantitative tool that involves a business choosing between making (manufacturing) a product in-house or to purchase it from an external provider (outsourced supplier)</span></label></p><p><label class="radio" data-answer="b47641c33ff0d6794b7c2f5943e661a2"><input type="radio"><span> The total cost of subcontracting production to a third-party supplier</span></label></p><p><label class="radio" data-answer="bb215cbb2052a75c31457001c3d5db49"><input type="radio"><span> A section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations</span></label></p><p><label class="radio" data-answer="a8dad5ed15178489d25197a11642c4ed"><input type="radio"><span> A quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is a cost centre?</p></div><div class="q-answer"><p><label class="radio" data-answer="a8dad5ed15178489d25197a11642c4ed"><input type="radio"><span> A quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="bb215cbb2052a75c31457001c3d5db49"><input type="radio"><span> A section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations</span></label></p><p><label class="radio" data-answer="088a35d9cfa75f701a2b13a8268f48c8"><input type="radio"><span> The difference between a firm's sales revenue of a product it sells and the variable costs of production</span></label></p><p><label class="radio" data-answer="bae4a93a65bffdcd03c52495e27ae589"><input type="radio"><span> A division of a business that has responsibility and accountability for its own operational costs</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>What is a profit centre?</p></div><div class="q-answer"><p><label class="radio" data-answer="a8dad5ed15178489d25197a11642c4ed"><input type="radio"><span> A quantitative technique used to calculate how many items need to be sold to cover all the firm’s costs</span></label></p><p><label class="radio" data-answer="088a35d9cfa75f701a2b13a8268f48c8"><input type="radio"><span> The difference between a firm's sales revenue of a product it sells and the variable costs of production</span></label></p><p><label class="radio" data-answer="1fd94cae23f789c007efbc1dbb8eeea6"><input type="radio"><span> A division of a business that has responsibility for its own operational costs</span></label></p><p><label class="radio" data-answer="bb215cbb2052a75c31457001c3d5db49"><input type="radio"><span> A section or division of a business organization that has both costs and revenues clearly identified and attributed to its operations</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><div class="totals"><span class="score">Total Score: </span><button class="btn btn-success check-total"><i class="fa fa-check-square-o"></i> Check</button></div></div><hr></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Contribution - Exam Practice Question</strong></p></div></div><div class="panel-body"><div><p><img alt="" src="../../../ib/businessmanagement/images/exams/exam103.jpg" style="width: 300px; height: 206px;"></p><table border="0" cellpadding="0" cellspacing="3" width="100%"><tbody><tr><td><p>(a)</p></td><td style="width:82.78%;"><p>Describe the meaning of a make or buy decision.</p></td><td style="width:12.76%;"><p><em>[2 marks]</em></p></td></tr><tr><td><p>(b)</p></td><td style="width:82.78%;"><p>Distinguish between total contribution and unit contribution.</p></td><td style="width:12.76%;"><p><em>[4 marks]</em></p></td></tr><tr><td><p>(c)</p></td><td style="width:82.78%;"><p>Complete the table below to determine the contribution per product <strong>and</strong> the overall profit for the business if it uses contribution costing. All figures in the table are in $'000. The firm's total fixed costs are $30,000.</p></td><td style="width:12.76%;"><p><br><em>[4 marks]</em></p></td></tr><tr><td></td><td style="width:82.78%;"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:198px;height:26px;"></td><td style="width:90px;height:26px;"><p align="center"><strong>Product A</strong></p></td><td style="width:90px;height:26px;"><p align="center"><strong>Product B</strong></p></td><td style="width:90px;height:26px;"><p align="center"><strong>Product C</strong></p></td><td style="width:90px;height:26px;"><p align="center"><strong>Product D</strong></p></td><td style="width:83px;height:26px;"><p align="center"><strong>Total</strong></p></td></tr><tr><td style="width:198px;"><p>Sales revenue</p></td><td style="width: 90px; text-align: center;">15</td><td style="width: 90px; text-align: center;">50</td><td style="width: 90px; text-align: center;">25</td><td style="width: 90px; text-align: center;">40</td><td style="width: 83px; text-align: center;"></td></tr><tr><td style="width:198px;"><p>Variable costs</p></td><td style="width: 90px; text-align: center;">10</td><td style="width: 90px; text-align: center;">25</td><td style="width: 90px; text-align: center;">15</td><td style="width: 90px; text-align: center;">30</td><td style="width: 83px; text-align: center;"></td></tr><tr><td style="width:198px;"><p>Contribution per product<sup>#</sup></p></td><td style="width: 90px; text-align: center;"></td><td style="width: 90px; text-align: center;"></td><td style="width: 90px; text-align: center;"></td><td style="width: 90px; text-align: center;"></td><td style="width: 83px; text-align: center;"></td></tr></tbody></table></td><td style="width:12.76%;"></td></tr></tbody></table><section class="tib-teacher-only" readonly="true" title="This box is not visible to students"><div class="header" readonly="true"><img class="icon" src="../../../thinkib/icons/teacher-only.svg"> Teacher only box</div><div class="content" readonly="false"><p><span style="color:#FF0000;"><strong>Answers</strong></span></p><p><strong>(a) Describe the meaning of a make or buy decision. <em>[2 marks]</em></strong></p><p><span style="color:#FF0000;">A make or buy decision is a BMT that compares the financial costs and benefits of producing a particular good or service in-house (internally) with the costs and benefits of hiring (paying for) an outsourced supplier to provide the product in question.</span></p><p><span style="color:#FF0000;">Award<em> [1 mark] </em>for a limited response that shows some understanding of the demands of the question.</span></p><p><span style="color:#FF0000;">Award<em> [2 marks]</em> for a definition that shows good understanding, similar to the example above.</span></p><hr class="hidden"><p><strong>(b) Distinguish between total contribution and unit contribution. <em> [4 marks]</em></strong></p><p><span style="color:#FF0000;">Total contribution refers to the difference between a firm's total sales revenue (TR) and its total variable costs (TVC), i.e., TR – TVC. The numerical difference is then used to pay the firm’s total fixed costs (TFC).</span></p><p><span style="color:#FF0000;">By contrast, unit contribution is the difference between the price (P) of a product and its average variable cost (AVC), i.e., P – AVC. The difference represents the profit margin or markup per each unit sold.</span></p><p><span style="color:#FF0000;">Award <em>[1 - 2 marks]</em> for an answer that shows some understanding of the demands of the question. The distinction between the two terms is not made clear.</span></p><p><span style="color:#FF0000;">Award<em> [3 - 4 marks]</em> for an answer that shows good understanding of the demands of the question. The distinction between the two terms is explicit and made clear. There is effective use of appropriate terminology throughout the answer.</span></p><hr class="hidden"><p><strong>(c) Complete the table below to determine the contribution per product and the overall profit for the business if it uses contribution costing. All figures in the table are in $'000. The firm's total fixed costs are $30,000. <em>[4 marks]</em></strong></p><table border="0" cellpadding="0" cellspacing="0" width="557"><colgroup><col width="222"><col span="5" width="67"></colgroup><tbody><tr height="42"><td class="xl63" height="42" style="height:31.5pt;width:167pt" width="222"><span lang="EN-HK"> </span></td><td class="xl64" style="width: 50pt; text-align: center;" width="67"><strong><span lang="EN-HK" style="mso-color-alt: windowtext">Product A</span></strong></td><td class="xl64" style="width: 50pt; text-align: center;" width="67"><strong><span lang="EN-HK" style="mso-color-alt: windowtext">Product B</span></strong></td><td class="xl64" style="width: 50pt; text-align: center;" width="67"><strong><span lang="EN-HK" style="mso-color-alt: windowtext">Product C</span></strong></td><td class="xl64" style="width: 50pt; text-align: center;" width="67"><strong><span lang="EN-HK" style="mso-color-alt: windowtext">Product D</span></strong></td><td class="xl64" style="width: 50pt; text-align: center;" width="67"><strong><span lang="EN-HK" style="mso-color-alt: windowtext">Total</span></strong></td></tr><tr height="21"><td class="xl65" height="21" style="height:16.0pt;width:167pt" width="222"><span lang="EN-HK">Sales revenue</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">15</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">50</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">25</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">40</span></td><td class="xl67" style="width: 50pt; text-align: center;" width="67"><strong><span style="color:#FF0000;"><span lang="EN-HK">130</span></span></strong></td></tr><tr height="21"><td class="xl65" height="21" style="height:16.0pt;width:167pt" width="222"><span lang="EN-HK">Variable costs</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">10</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">25</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">15</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span lang="EN-HK" style="mso-themecolor: text1;mso-themetint:128">30</span></td><td class="xl67" style="width: 50pt; text-align: center;" width="67"><span style="color:#FF0000;"><strong><span lang="EN-HK">80</span></strong></span></td></tr><tr height="21"><td class="xl65" height="21" style="height:16.0pt;width:167pt" width="222"><span lang="EN-HK">Contribution per product</span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><strong><span style="color:#FF0000;"><span lang="EN-HK">5</span></span></strong></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span style="color:#FF0000;"><strong><span lang="EN-HK">25</span></strong></span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span style="color:#FF0000;"><strong><span lang="EN-HK">10</span></strong></span></td><td class="xl66" style="width: 50pt; text-align: center;" width="67"><span style="color:#FF0000;"><strong><span lang="EN-HK">10</span></strong></span></td><td class="xl67" style="width: 50pt; text-align: center;" width="67"><strong><span style="color:#FF0000;"><span lang="EN-HK">50</span></span></strong></td></tr></tbody></table><p><span style="color:#FF0000;">Therefore, the overall profit for the business = $50,000 minus $30,000 = <strong>$20,000</strong>.</span></p><p><span style="color:#FF0000;">Award up to <em>[2 marks]</em> for calculating the contribution for the business. Apply the own-figure rule (error carried forward) as appropriate. All calculations of contribution must be correct for full marks.</span></p><p><span style="color:#FF0000;">Award up to a further <em>[2 marks]</em> for calculating the overall profit, with working out shown. Apply the own-figure rule as appropriate.</span></p></div></section></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Using contribution as part of the BMT in the syllabus</strong></p></div></div><div class="panel-body"><div><p>Some suggested units for integrating contribution analysis in teaching the contents of the syllabus include (not exhaustive):</p><ul class="branded"><li><p>Unit 1.5 - Discuss how knowledge of contribution analysis can support a firm’s internal and external growth strategies.</p></li><li><p>Unit 3.3 - Discuss the value of contribution analysis for cost (financial) control.</p></li><li><p>Unit 3.9 (HL only) - Explain how contribution costing can be a useful decision-making tool for finance managers in setting annual budgets.</p></li><li><p>Unit 4.5 - Explain how contribution analysis can be useful in setting the price of a product.</p></li><li><p>Unit 4.5 - Explain how a change in pricing methods affects contribution <u>and</u> profit margins of the products sold by a business.</p></li><li><p>Unit 4.5 - Explain how contribution analysis can be used to assist decisions about a firm’s product portfolio.</p></li><li><p>Unit 4.5 - Explain how contribution costing can be a useful decision-making tool for determining the prices a business sets for its goods and services.</p></li><li><p>Unit 5.5 - Explain the role of contribution for the financial sustainability of a business organization.</p></li><li><p>Unit 5.6 (HL only) - Discuss the role of contribution in make-or-buy decisions. Include the cost to make (CTM) and cost to buy (CTB) in your answer.</p></li><li><p>BMT (The <a href="../42577/bmt-4-boston-consulting-group-bcg-matrix.html" title="New syllabus 2022 » Business Management Toolkit (BMT) » BMT 4 - Boston Consulting Group (BCG) matrix">BCG matrix</a>) - Examine the relationship between contribution analysis a firm's product portfolio.</p></li></ul></div></div><div class="panel-footer"><div></div></div></div><p><span style="font-family:arial,helvetica,sans-serif;">Return to the <a href="../42640/business-management-toolkit-bmt.html" title="New syllabus 2022 » Business Management Toolkit (BMT)">Business Management Toolkit (BMT)</a> homepage</span></p><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" src="../../../ib/businessmanagement/logo-blue-black-1.png" style="width: 170px; height: 54px;"></span> </p><script>document.querySelectorAll('.tib-teacher-only').forEach(e => e.remove());</script>
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