Mastering the 11th Business Maths: A Comprehensive Guide to Exercise 6.1 Solutions
Business maths is one of the most important aspects of business studies. It’s crucial for businesses to have an excellent understanding of this subject, as it assists in making important decisions. One of the most crucial components of business maths is mastering Exercise 6.1, which is a significant part of the syllabus for the 11th grade. This article will provide you with a comprehensive guide to Exercise 6.1 solutions, breaking down the process and providing examples for you to follow along.
Understanding Exercise 6.1
Exercise 6.1 is divided into three main parts. Part A focuses on finding the production cost of an item, while Part B revolves around calculating the break-even point for a product. Finally, Part C delves into analyzing the margin of safety for a business. These concepts are vital for any business since they provide insights into the financial health of a company.
Part A: Production Cost Calculation
In Exercise 6.1, part A, students are expected to calculate the production cost of an item. To achieve this, one must consider the various costs that are involved in the production process. These costs may include direct material costs, direct labor costs, and factory overhead costs.
To calculate the production cost for a single item, one should add up all the expenses that go into producing the item. By doing so, you’ll have the total production cost for that item. It’s important to break down these costs to obtain a clear picture of how the final price for a product is determined.
Example: Let’s assume that a company produces t-shirts. The direct material cost for a single t-shirt is $10, while the direct labor cost is $5. The factory overhead cost for that t-shirt is $3. To calculate the production cost, you should add up these values, totaling $18.
Part B: Break-Even Point Calculation
The Break-even point is the point where a company’s revenue is equal to the total cost incurred to produce a product. In Exercise 6.1, part B, students are expected to calculate the break-even point for a product. A company needs to understand the break-even point to ensure that they are not making losses.
To calculate the break-even point for a product, one must consider the total fixed costs and the contribution margin per unit. The contribution margin is the difference between the selling price and the variable cost per unit.
Example: Let’s continue with our previous example of t-shirts. Suppose the selling price of a t-shirt is $25, while the total fixed costs of the company are $5000. The variable cost per t-shirt includes the direct material cost of $10, direct labor cost of $5, and the factory overhead cost of $3, totaling to $18. To calculate the break-even point, we divide the total fixed cost by the contribution margin per t-shirt, which is $7 ($25-$18). The result is approximately 714 t-shirts that need to be sold to reach the break-even point.
Part C: Margin of Safety Analysis
The margin of safety is the degree of deviation between the actual number of products sold and the break-even point. In Exercise 6.1, part C, students are expected to analyze the margin of safety for a business. Margin of safety is a crucial tool for businesses since it enables them to plan for future business undertakings.
To calculate the margin of safety for a product, one must consider the actual number of products sold and subtract the break-even point from this figure. The result of this calculation will give you the margin of safety.
Example: Suppose the company selling t-shirts sold 1000 units, while the break-even point is 714 units. The margin of safety would be 286 units.
In Conclusion
Business maths is a vital aspect of any business, and mastering Exercise 6.1 is equally important. This exercise provides insights into calculating the production cost, break-even point, and margin of safety for a product. By understanding these concepts, businesses can make informed decisions that will keep them financially healthy. By following the steps outlined in this guide and analyzing relevant examples, students are sure to master Exercise 6.1, gaining an understanding of business finances that will stay with them throughout their careers.
(Note: Do you have knowledge or insights to share? Unlock new opportunities and expand your reach by joining our authors team. Click Registration to join us and share your expertise with our readers.)