Embedded - Maths (Numeracy) workshop. Total number of 16 students (Predominately British/Asian culture): 8 Female, 8 Male

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1 Lesson Plan: Lecturer: David Hilton Division: Business Management & Enterprise Course: BTEC: Extended Diploma in Business Level 3 Course codes: C49794/6 Date: 30 th May 2012 Time: 11:00 12:30 hrs. Place: S214 Subject: Unit 7: Management Accounting Scheme of work: Week : 38 Lesson Title: Embedded - Maths (Numeracy) workshop Group Profile: Total number of 16 students (Predominately British/Asian culture): 8 Female, 8 Male It is a group of mixed ability learners, some of which require continuous motivation and stimulation to learn. They are quite participative and competitive and interact well in group/team scenarios. Table indicates grades to-date: All students have progressed from Southall s 1 st year - 9 units BTEC: Extended National Diploma in Business - programme. Also, most students have GCSE backgrounds school / college routes Grades A-D. Lecturer: David Hilton Page 1 of 4 29/05/2012

2 Aim of lesson: The principle aim of this lesson is to introduce students to the Business / Mathematical concepts connected to Management Account via a numeracy workshop; Objectives / Learning outcomes: By the end of the lesson the learner should be able to: Evaluate the reliability of break-even analysis in estimating budgeted activity levels for a selected organisation. Evaluate the implications of budget variances for a selected organisation. Assessment / Monitoring of Learning: Teacher- student interaction, Q & A, Group, and Individual feedback. Differentiated Strategies and Personalisation: Lesson working towards preparing students - mathematically - for Unit 7: Task 2: P2, Task 3: M1, Task 4: D1 and Task 10: D2 see attached facsimiles. Enclosed Unit 7 tracking-sheet outlines students who are capable or aiming for minimum target or higher Merit / Distinction grades. Group selection based on building team/group cohesion and shared learning experience through mixing abilities outlined in group profile. The lesson s analysis tasks are divided equally amongst the three group as follows: Group 1: Reliability of break-even analysis in estimating budgeted activity levels Group 2: Impact of rising / falling interest or inflation on business scenario Group 3: Implications of budget variances for a selected organisation. More advanced learners will be tasked with the opportunity to drill down into the equations, so as, to contribute to the analysis and evaluation aspects delineated in Task 3: M1, Task 4: D1 and Task 10: D2. Essential skills to be developed are numeracy: include graphs, variance, and operation sense (addition, subtraction, multiplication, division, percentages, proportionality and fractions), and computation, measurements relating to break-even & variance analysis. Contingency plan: The online lesson materials are located on the following web site: URL: Notwithstanding, in the event of a technical failure, hardcopies of the resource materials are available to the class - which illustrating relevant classroom based activities. SHAPE agenda: This lesson will make reference to Being Healthy (H) and Economic wellbeing (E), Achieving (A) and Making a Positive Contribution (P). Equipment: Laptop, SMART-Board & Projector student computers, Handouts, Whiteboard Lecturer: David Hilton Page 2 of 4 29/05/2012

3 Time 25 min Content / Teacher Activity Register, Recap & Outline lesson objectives. Student Activity Resources SHAPE Organise into allotted Groups and listen to outline of class activities. e-register, student s portal - online SOW (scheme of work) and hand-outs A, E & H 5 min Group activity: Workshop task allocation. Read information sheet for group activities. Activities handouts, flip-chart paper. A & P 20 min Group activity: Prepare Breakeven, Variance, and percentage analysis tasks for presentation Students are required to calculate and explain the Break-even, Variance, and Percentage analysis task allocated to their group by; utilising aspects delineated in Task 3: M1, Task 4: D1 and Task 10: D2. Activities handouts, flip-chart paper. A & P 30 min Group activity: Present Breakeven, Variance, and percentage analysis tasks The three groups are to present their individual analysis task s allocated to their group delineated in Task 3: M1, Task 4: D1 and Task 10: D2. Activities handouts, flip-chart paper. A & P 10 min Summary of lesson Q & A Groups to demonstrate completion of tasks and ask and answer questions Activities handouts, flip-chart paper. A & P Resources used: Scheme of Work: Key-tasks: Lecturer: David Hilton Page 3 of 4 29/05/2012

4 Observation of Learning and Teaching 2011/12 Observer: Alan Carter Observee: David Hilton Dual Observer/Moderator: Staff Status: Teacher Staff Type: Permanent Date of Observation: Length of observation: mins 30/05/2012 Department: Business Management and Room: 214 Site: Southall Enterprise Qualification/subject/programme: Dual Observation: Re-Observation: Add Diploma in teaching Maths (numeracy) No No SSA: ESOL Type of Learner: MOA: PT If other please state: Course Code: Lesson type: Mixed C49794/6 Course level: L3 Activity Theory No. at start: 15 Total: 15 No on register: 16 In class support: No Name of support tutor: Context and focus of observation: (include stage in programme and length and type of session) Assessed observation Specific learning / assessment objectives for the session observed: Summary Evaluation: ( this section must begin with a clear judgement statement to reflect the grade awarded) Strong learner engagement with excellent work produced demonstrating high achievement in the subject area and communication skills. Numeracy was embedded with again some evidence of high achievement. However, some learners not fully engaged with this. Learning was carefully planned with good links to employment and upcoming assessments. Good to see experimentation with developing the curriculum and making use of IT tools, which learners are likely to encounter in the work place. The activities encouraged critical thinking with learners expected to produce rationales for their conclusions. Judgement on the overall quality of the learning session (Leave blank if grading not appropriate) Grade Pass Referred Fail GRADE: Pass Observer s signature Alan Carter Date30/5/2012 Observee s signature Date Page 1 of 5

5 Observation of Learning and Teaching 2011/12 Observer s notes - the story of the lesson. This is an interesting exercise that uses embedded IT and numeracy to develop ability to deal with business studies problems. Started with LO and how the class will progress. Your Q&A is good in that you ask learners to explain their answers. You might get a little more out of this by asking other learners if they agree or disagree and getting their justification rather than allowing first answer to be explained by that student. Group 1 and 3 got off to a quick start with the first activity but G2 were not following. What caused this problem? Good checking of understanding of task. Interesting the way you got three groups to look at the same problem from three different angles. Was it clear that the learners needed to use transposition of formula in each activity and which mathematical formula they needed to prove their findings? H & P did not know what inflation was. They knew it was related to the RPI and took a while to give a reasonable idea of what inflation could be. For example, their first action was to raise prices from 30 to 50. They had no idea what % increase this represented. P said my maths is c S & N introduced the idea of demand pushing up prices. Again they talked in numbers rather than % change. In this case it was probably appropriate. Group 3 were clear on working out % increase and decrease and confident that the calculator produces the correct answer. They were however, also confident that they could check the answer with basic maths. When you talked to H &P you found another example where a small number can have a big impact. It seems that some awareness of how numbers work could be in order. Feedback from groups demonstrated good embedding of communication skills. The numeracy was perhaps at a level lower than you expected. H&P made significant progress and demonstrated how a reasonable inflation rate impacts on the sales needed. What input did you give them? What would you change about the way you introduced analysing curves and a graphic functions? Summary Judgements to incorporate evaluation of: learning (progress being made by learners during the lesson, developing skills, knowledge & understanding); attainment (the standard of skills, knowledge and understanding demonstrated by learners judged against the standard expected of them at that point in their course, irrespective of their starting-point); teaching (the role of the teacher in preparing and delivering or facilitating learning) [See Guide for explanation.] A good session that demonstrated how numeracy can provide strong support for the business assignments. By the end of the sessional learners were confident that they had clear ideas on how to pass the assignment. Groups worked at different levels. However, it is clear that perhaps further differentiation work is needed to ensure all learners have an understanding of %, at least an appreciation of what % mean. E.g. is 10% inflation high? Good links made to past learning, upcoming assessment and skills & knowledge needed for further studies. Learner feedback was very positive. Other observations. Include comments on: learner (and employer) views on their learning; L&M issues or aspects of the lesson which have negatively impacted on learning but which are outside the influence of the teacher Page 2 of 5

6 Observee Evaluation of Observed Lesson (Please complete before receiving feedback and to bring to the feedback session) Observee Name: David Hilton Observer Name: Alan Carter Date: 30/05/2012 Session observed: Division: Business Management & Enterprise Course: BTEC: Extended Diploma in Business Level 3 Course codes: C49794 & C two groups of 9 & 6 respectively. Date: 30th May 2012 Time: 11:00 12:30 hrs. Place: Southall Campus - Room S214 Subject: Unit 7: Management Accounting Scheme of work: Week : 38 Lesson Title: Embedded - Maths (Numeracy) workshop To what extent did learners achieve the planned learning objectives? The principle aim of this lesson was to facilitate students - via a numeracy workshop capability in applying Business / Mathematical concepts i.e. Student was prepared - mathematically for the following tasks: Unit 7: Task 2: P2, Task 3: M1, Task 4: D1 and Task 10: D2. Ref: SOW: By the end of the lesson the learners were able to: Evaluate the reliability of break-even analysis in estimating budgeted activity levels for a selected organisation. Evaluate the implications of budget variances for a selected organisation. However, some learners, who were not pursuing higher grades, only really engaged at a low level - in and failed to take full advantage of the embedded maths lesson. Overall Comments on Learning Session Page 3 of 5

7 The learning session was designed primarily to enable those students - pursuing higher grades - to acquire the necessary analytical maths/numeracy skills. Consequently, the stated learner outcomes were expected for a learning session that was focused on a differentiation strategy of developing maths analytical skills. The following group differential exercises were designed to afford all individual in the group/s an opportunity via analytical maths/numeracy skills development - an attempt at Merit and Distinction tasks: Group 1: Reliability of break-even analysis in estimating budgeted activity levels Group 2: Impact of rising / falling interest or inflation on business scenario Group 3: Implications of budget variances for a selected organisation. Notwithstanding, not all students aspiring to Merit & Distinction level grades, were expected to fully understanding the maths being used in the lesson. More intermediate maths embedding is recommended on the scheme of work to strengthen broader opportunity. At present, 25% of the session group have achieved: Distinction grade, 25% Merit grade and 50% Pass grade in this unit. See Mark Book Group C49794 Unit 7: Management Accounting for evidence. This is a discernible improvement on previous years. Page 4 of 5

8 Scheme of Work: Unit 7: Ealing, Hammersmith & West London College Business Management & Enterprise division Course: BTEC: Diploma / Extended Diploma in Business - Level: 3 Business Management & Enterprise division Subject: Unit 7: Management Accounting - internally assessed Class Duration: 90 minutes (Weekly) Staff: David Hilton david.hilton@wlc.ac.uk Room: S06 Tel: /6114 Week Topic Learning outcome Essential development Resources Assignment / Homework 0 05/09/11 Introduction to Unit.7: Management Accounting. 7.1: How production costs are determined and used to calculate prices. 7.2: Using break-even analysis. 7.3: Using statistical information to review and predict business performance. 7.4: Using budgetary techniques. At the end of the course, students will be able to: Grasp an overall understanding of the unit. Develop student s ability to manage an organisation s profitability and use statistical information to review & predict performance in the long-term. Comprehension understanding the scope and structure of the course. IT Skills students will prepare adequate resources required to work throughout this module. Analytical skills. Numeric skills. Develop their ICT skills. E.g. Word-processing: Spread sheet, Power-point presentation & Mind-mapping software skills. Text book: (Unit.7, P47- P83). BTEC National - Business - Book 2, Jon Sutherland and Diane Canwell. (2007). Nelson Thornes, Ltd. Whiteboard, board markers; handouts; worksheets (Interactive skills exercise/quizzes), newspapers, trade magazines and computers/websites. OHT / OHP/ Case studies Turn-it-in-UK is an online service hosted at that enables college staff to carry out electronic comparison of students' work against electronic sources including other students' work. Students will be required to carry out Classroom: Group and independent learning. Examine various business practices. Via :- Broad issues activities Key terms / Glossary Thinking points Practice points Case studies The unit s coursework is delineated into the following assignments criteria levels: Pass: P1, P2, P3, P4 & P5 Merit: M1, M2 & M3 Distinction: D1 & D2 Assignments to be submitted electronically: Turn-it-in-UK Page 1 of 9

9 Week Topic Learning outcome Essential development Resources Assignment / Homework 1 12/09/ /09/ /09/ /10/ /10/11 Unit 7.1: How production costs are determined and used to calculate prices. 1st Learning outcome: By the end of these sessions the learner should be able to understand how production costs are determined and used to calculate prices by describing how an organisation can cost a product and determine its price at any activity level i.e. by describing: (1): The main cost elements that a business needs to consider, citing the nature of the following costs : By outlining the (Direct Cost): Labour, Material & Energy and (Indirect Costs): Marketing & Delivery in the following profit formula: Costs Introduction Costs Direct/Variable costs Semi-variable costs Stepped costs Indirect costs Fixed Costs Cost centres and profit centres. Non-production (service) department overheads Overhead allocation Apportionment Overhead absorption rate Absorption costing Absorption example Activity-based costing Marginal costing Marginal example Standard costing You Tube Films on: Recycle your electronic appliances. ewaste Video 1. Introduction 2. Costs 3. Direct/Variable costs 4. Semi-variable costs 5. Stepped costs 6. Indirect costs 7. Fixed Costs 8. Cost centres and profit centres. 9. Non-production (service) department overheads. 10. Overhead allocation 11. Apportionment 12. Overhead absorption rate 13. Absorption costing 14. Absorption costing example 15. Activity-based costing 16. Marginal costing 17. Marginal costing Students will be required to carry out: Classroom, Group and independent learning. Complete the following by the end of week 07/11/11 : Unit.7 Task.1: P.1 Submit assignment via Turn-it-in-UK: Management Accounting Assignment Inbox See full assignment for comprehensive details Page 2 of 9

10 6 17/10/ /10/11 Gross profit = Sales Revenue - Costs of Sales, and Net profit = Gross profit - expenses. (2): The concept of absorption of overheads. (3): What is meant by marginal costs in words & formula (4): examples of ways in which a business might set the price of the products or services that it offers Prices example 18. Standard costing 19. Cost plus Half-Term: Monday 24 th October 2011 Friday 28 th October Week 7 Prices Cost plus Discounting Impact of pricing policies on production and costs Income 20. Discounting 21. Impact of pricing policies on production and costs 22. Income Complete the following by the end of week 07/11/11 : Unit.7 Task.1: P.1 Submit assignment via Turn-it-in-UK: Management Accounting Assignment Inbox See full assignment for comprehensive details Week Topic Learning outcome Essential development Resources Assignment / Homework 9 07/11/ /11/11 7.2: Using break-even analysis. 1st Learning outcome: By the end of these sessions the learner should be able to explain: What is meant by break-even analysis? How they would use the break-even technique to Introduction Break-even analysis Contribution and break-even formula Break-even graph Total revenue Total fixed costs Variable costs/total costs 1. Introduction 2. Break-even analysis 3. Break-even graph 4. BEP example 5. Budgeted activity and sales levels 6. Numerical calculations Complete the following by the end of week 12/12/11: Unit.7 Task.2: P.2 Page 3 of 9

11 11 21/11/ /11/ /12/11 explain the relationships between costs and income? Calculate the break-even point from the information (hyperlinked Selling price) in their chosen organisation s break-evenchart. Calculate the margin of safety. Calculate the target profit levels of activity. Break-even point BEP example Area of profit and area of loss Margin of safety Chart example Budgeted activity and sales levels Numerical calculations Changing Overheads Direct costs Target profit levels of activity 7. Changing Overheads Case study: Windscreen One Case study: Breakeven analysis Complete the following by the end of week 12/12/11: Unit.7 Task.3: M.1 Submit assignment via Turn-it-in-UK: Management Accounting Assignment Inbox 14 12/12/11 Using the same information, create a breakeven chart fully labelled 2nd Learning outcome: Christmas 19 th Dec nd Jan weeks 15 and /01/12 Analysis stated break-even and analyse two more scenarios increased price & decreased price for effects. 3rd Learning outcome: Use of computerised spreadsheets (tabulation, charts and goal-seeking) Limitations and assumptions Sales levels being identical to production 8. Target profit levels of activity 9. Use of computerised spreadsheets 10. Limitations and assumptions Complete the following by the end of week 09/01/12: Page 4 of 9

12 18 09/01/12 Evaluate the reliability of breakeven analysis in estimating budgeted activity levels for the learner s selected organisation. levels Consistency of selling price Contribution and overheads behaviour External factors Inflation Interest rates 11. External factors 12. Break-even-chart Unit.7 Task.4: D.1 Submit assignment via Turn-it-in-UK: Management Accounting Assignment Inbox See full assignment for comprehensive details Week Topic Learning outcome Essential development Resources Assignment / Homework 19 16/01/ /01/12 7.3: Using appropriate statistical information to review and predict business performance. 1st Learning outcome: By the end of these sessions the learner should be able to use appropriate statistical information to review and predict business performance by explaining: The component parts of a profit and loss account and balance sheet Introduction Accounting data Previous period (sales, production, costs and profits) Information from published financial reports Statistical information Introduction Changes over time Moving averages Seasonal variations Changes over time Moving averages Seasonal variations Price indices Trends to assess & predict business Useful websites: Financial statistics Bank of England Statistics Moving average - Technical analysis Money supply Complete the following by the end of week 27/02/12: Unit.7 Task.5: P.3 Submit assignment via Turn-it-in-UK: Management Accounting Assignment Inbox Page 5 of 9

13 21 30/01/ /02/12 and How gross and net profit are calculated for organisation selected by the lecturer. Demonstrate and explain the performance of the business by performing and explaining financial ratios of the selected business. Price indices Trends to assess & predict business Performance Ratio analysis Liquidity ratios - Current ratio - Liquid capital ratio Financial analysis - linked to financial ratios Historical Yield Curve Short-term Macro- Economic Indicators Consumer Price Indices Using cash flow ratios to predict business failures See full assignment for comprehensive details 2nd Learning outcome: 24 20/02/ /02/12 26 Special Additional Class: Maths: Ratio Analysis Maths Revision Thesaurus By the end of these sessions the learner should be able to use appropriate statistical information to review and predict business performance by analysing and explaining: The trends of the accounting ratios the learner has calculated in Task 5. The importance of including statistical Profitability Ratios: Gross Profit Margin % Net Profit Margin % (ROCE) Return on Capital Employed Solvency Ratios: Current Asset Ratio Acid test ratio Performance Ratios: Stock Turnover (No. of times) Fixed Asset Turnover (No. of times) Half Term: 13 th 17 th February 2012 Week 23 Shareholders Ratios: Earnings Per Share Price / Earning Classroom activities: Business Forecasting Interpretation of Final Accounts Complete the following by the end of week 20/03/12: Unit.7 Task.6: M.2 Submit assignment via Turn-it-in-UK: Management Accounting Page 6 of 9

14 06/03/12 data (such as RPI) and seasonal variances to assess and predict future business performance Debtor days Creditor days Capital Gearing Previous periods Current Assets Turnover Assignment Inbox See full assignment for comprehensive details Week Topic Learning outcome Essential development Resources Assignment / Homework 27 14/03/ /03/ : Using budgetary techniques. 1st Learning outcome: Describing how budgets can be used to set targets, monitor and control the learner s selected business organisation in the following areas: Preparing and revising budgets Use of budgets for short-term target setting Budgeting Budgets: Master Sales Production Purchases Debtors and creditors Cash Departmental (Consolidation) Case Study: Budget Budgeting Budget Techniques Complete the following by the end of May 2012 Unit.7 Task.7: P.4 Monitoring 29 28/03/ /04/12 Control measures Reliability Relationship between costs and incomes at different activity levels 2nd Learning outcome: Using budgetary techniques to Unit.7 Task.8: P.5 Spring Holiday: Monday 2 nd April 2012 Friday 13 th April 2012 Week 30 & 31 Standard costing Analysis of variances Case Study: Budget Complete the following by the end of May 2012 Page 7 of 9

15 33 24/04/ /05/ /05/ /05/ /05/12 prepare budgets for the learner s selected organisation. 3rd Learning outcome: Analysing the impact on a budget of changes in costs and selling prices for the learner s selected organisation. 4 th Learning outcome: Evaluating the implications of budget variances for the learner s selected organisation Budget Techniques Preparing & revising budgets Use of budgets for short-term target setting Monitoring Control measures Reliability Relationship between costs and income at different activity levels Strengths and weaknesses of budgetary techniques Budgeting Budget Techniques Embedded Maths (Numeracy ) Workshop Principally relating to D1 & D2 Unit.7 Task.9: M.3 Unit.7 Task.10: D.2 Submit assignment via Turn-it-in-UK: Management Accounting Assignment Inbox 38 Group 1 Group 2 Group 3 28/05/12 Reliability of break-even analysis in estimating budgeted activity levels Impact of rising / falling interest or inflation on business scenario Implications of budget variances for a selected organisation. 39+ Workshop for assignments 29/05/12 The date for all first drafts of assignments will be the week ending 1 st June. Page 8 of 9

16 This is the weekend just before the bank holiday. All first drafts should be on Turn It In (UK) by that date. The FINAL DATE for students to hand in work to Turn It In (UK) will be the week ending 18th June. Page 9 of 9

17 Ealing, Hammersmith & West London College: Assignment front sheet Learner name Assessor/s name Mr David Hilton Date issued Completion date Submitted on 12 th September th May 2012 Qualification BTEC L3: National Extended / Diploma in Business Unit number and title Unit 7: Management Accounting Assignment titles Regional Business Support Agency & Helping set-up and run a family business. In this assessment you will have opportunities to provide evidence against the following criteria. Indicate the page numbers where the evidence can be found. Criteria reference To achieve the criteria the evidence must show that the student is able to: Task no. Page numbers P1 Explain how an organisation can cost a product and determine its price at any activity level. 1 2 P2 Carry out a break-even analysis for a selected organisation. 2 3 M1 D1 P3 M2 Assess the implications of different activity levels using the results of a breakeven analysis for a selected organisation. Evaluate the reliability of break-even analysis in estimating budgeted activity levels for a selected organisation. Use accounting data and statistical information to measure business performance. Analyse the importance of accounting data and statistical information to assess and predict business performance P4 Use budgetary techniques to prepare budgets for a selected organisation. 7 6 P5 M3 Describe how budgets can be used to set targets, to monitor and control an organisation. Analyse the impact on a budget of changes in costs and selling prices for a selected organisation D2 Evaluate the implications of budget variances for a selected organisation Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Learner signature: Date: Page 1 BTEC: National in Business - Unit 7: Management Accounting Level 3

18 Ealing, Hammersmith & West London College: Assignment brief Unit number and title Qualification Unit 7: Management Accounting BTEC L3: National Extended / Diploma in Business Start date October 2011 Deadline May 2012 Assessor David Hilton Assignment (1) title: Assignment (2) title: Assignments compiled by: Management accounting on behalf of a RBSA Helping set-up and run a family business. david.hilton@wlc.ac.uk Assignments approved by: The purpose of this assignment is to enable learners to develop an understanding of how important management accounting is to all businesses. It looks at costing and budgeting, and how to use current or historical financial data to plan for the effective finances and costs of the business for the future. Assignment (1): Scenario: Management accounting on behalf of a RBSA P1, P2, M1 & D1 You work for a RBSA (Regional Business Support Agency) as part of a Management Accountancy Unit. Your role will be to facilitate the task of explaining key Management Accounting Concepts to young business people in the area. In particular you will be expected to give advice on costing, break-even analysis, how to measure business performance and budgetary applications. Task submission dates and tutor feed-back/recommended corrective action/s, are posted on the college s e-portfolio system i.e. Turn-It-In.(UK) Task 1 [P1]: How an organisation can cost a product and determine its price at any activity level. For Task 1 you should describe - using between ( words) for each point - the following: 1. The main cost elements that a business needs to consider, citing the nature of these costs. For example use the following equation to illustrate your direct costs: Gross profit = Sales Revenue Costs of sales Where Costs of Sales is made-up of the following Direct Costs: Labour, Material & Energy For example use the following equation to illustrate your indirect costs: Net profit = Gross profit Expenditure Where Expenditure is made-up of the following In-direct Costs: Marketing, Delivery & Administration 2. Variable-costs and give an example. 3. Fixed costs and give an example. 4. Semi-fixed or semi-variable costs and give examples. 5. The concept of absorption of overheads. 6. What is meant by marginal costs (explaining the equation) and 7. Give two or more examples of ways in which a business might set the price of the products or services that it offers (you can include pricing based on the costs incurred by the business). Page 2 BTEC: National in Business - Unit 7: Management Accounting Level 3

19 How you will be marked For P1, you must describe clearly the main costs elements and the nature of those costs including variable, fixed and semi-fixed (semi-variable). You should give examples of costs relevant to the product in question. You should mention the absorption of overheads, as well as marginal costs, although distinction between traditional and modern absorption costing methods (ABC) is not required. You should describe at least two methods of setting the price, including cost. Hints from the syllabus Costs: direct/variable costs (raw materials, unfinished goods, direct labour costs, direct expenses, depreciation); semivariable costs; stepped costs; indirect costs; fixed costs; cost centres; profit centres; non-production (service) department overheads; overheads allocation; apportionment; overhead absorption rate; absorption costing; activitybased costing; marginal costing; standard costing Prices: cost plus; discounting; impact of pricing policies on production and costs; income This task will enable you to achieve P1 Task 2: [P2]: Carry out break-even analysis for a selected organisation using excel software Using data & information from your own organisation s break-even-chart a): Explain what is meant by break-even analysis. b): Describe how you would use the break-even technique to explain the relationships between costs and income. c): Calculate the break-even point from the information in your own organisation s break-even-chart. d): Calculate the margin of safety. e): Calculate the target profit levels of activity. f): Using the same information, create a break-even chart, (i) Label the break-even chart. (ii) Label the break-even point on the chart. (iii) Label the budgeted activity level, (iv) Label the margin of safety, (v) Label the area of profit, (vi) Label the area of loss. How you will be marked For P2, You could be given the relevant information in a case study and you will explain what is meant by break-even analysis. You will carry out break-even analysis, calculating the break-even point accurately from the information on direct costs, selling price and overheads, using the correct formula. You will also calculate margin of safety and target profit levels of activity. You will prepare a break-even chart to show the same results in diagrammatic form or excel software (Charts + Spread-sheet/s), labelling break-even point, budgeted activity level, margin of safety, area of profit and area of loss. P2, M1 and D1 are linked. Hints from the syllabus Break-even analysis: contribution; break-even formula; break-even graph; breakeven point; area of profit; area of loss; margin of safety; budgeted activity and sales levels; numerical calculation; changing overheads; direct costs; selling prices and budgeted activity levels; target profit levels of activity; This task will enable you to achieve P2 Task 3: [M1]: Assess the implications of different activity levels using the results of a breakeven analysis for a selected organisation. Suggest activity levels using the results of break-even analysis for a selected organisation. Building on the work that you carried out for P1 and P2: a): Work out the appropriate selling price for the product. b): Suggest an activity or production level. Make sure that your suggestions take into account the appropriate mark-up on cost, that you take account of the current market prices (i.e. you can refer to links in an internet site for current prices), and that you take the break-even point and the required margin of safety into account. How you will be marked Page 3 BTEC: National in Business - Unit 7: Management Accounting Level 3

20 For M1, you will work with the break-even figures calculated in the case study for P2 and will decide on an appropriate selling price for a product and an activity (production) level. You will make decisions on the basis of appropriate markup on cost, current market prices, break-even point and the required margin of safety. Other factors might be included in the information, but you are expected to identify the most important ones in making your decisions. Hints from the syllabus Break-even analysis: contribution; break-even formula; break-even graph; breakeven point; area of profit; area of loss; margin of safety; budgeted activity and sales levels; numerical calculation; changing overheads; direct costs; selling prices and budgeted activity levels; target profit levels of activity; use of computerised spread-sheet (tabulation, charts, goal-seeking); limitations and assumptions (sales levels being identical to production levels, This task will enable you to achieve M1 Task 4: [D1]: Evaluate the reliability of break-even analysis in estimating budgeted activity levels for a selected organisation. Building on the necessary groundwork that you carried out for P2 and M1, you should review and answer all of the following: 1. What are the limitations of using the break-even technique? 2. What inaccurate assumptions are made with regard to the relationships between cost and income when you use the break-even technique? 3. Why might costs and income change in relation to one another at differing levels of activity? 4. Why is it dangerous to assume that all products being made, or that could be made, will be sold? 5. It appears that only one product is making a contribution. What might be the implications if another product was introduced that makes a different level of contribution? 6. What might be the impact on the business if inflation were (a) to rise, (b) to fall? 7. What might be the impact on the business if interest rates were (a) to rise, (b) to fall? How you will be marked For D1, you will review the information used in carrying out break-even analysis and explain the limitations of such techniques. You should draw out any inaccurate assumptions that the relationship between costs and income remains the same at all levels of activity. You should also identify other limitations, such as assumptions that all units produced will be sold, that there is only one product and that all products make the same contribution. External factors such as the effects of inflation and interest rates might also be pertinent. Hints from the syllabus Break-even analysis: contribution; break-even formula; break-even graph; breakeven point; area of profit; area of loss; margin of safety; budgeted activity and sales levels; numerical calculation; changing overheads; direct costs; selling prices and budgeted activity levels; target profit levels of activity; use of computerised spread-sheet (tabulation, charts, goal-seeking); limitations and assumptions (sales levels being identical to production levels, consistency of selling price, contribution and overheads behaviour); external factors (inflation, interest rates) This task will enable you to achieve D1 Assignment (2): Scenario: Helping set-up and run a family business. You have been recruited into helping your uncle s family set up and run a business on the Broadway - (you must discuss and agree the specific business with your lecturer). In the past he has set up and ran smaller scale businesses, but has muddled up his finances. Your knowledge and guidance regarding financial aspects will be essential to build this into a successful venture. Task submission dates and tutor feed-back/recommended corrective action/s, are posted on the college s e-portfolio system i.e. Turn-It-In.(UK) Page 4 BTEC: National in Business - Unit 7: Management Accounting Level 3

21 Task 5: [P3]: Describe how to use accounting data and statistical information to measure business performance. Describe how previous profit and loss statements as well as previous balance sheets can be used to measure business performance. Demonstrate and explain the performance of the business by performing and explaining financial ratios of the business by calculating the following ratios: Liquidity ratios Profitability ratios Efficiency ratios Current ratio Liquid capital ratio Capital Gearing Gross profit mark-up Gross profit margin Net profit margin Overheads to sales margin Return on capital employed Stock turn over days Debtors collection days Creditors payment days Fixed asset turnover Net current asset turnover Add a section describing how seasonal variations and moving averages of indices such as the RPI need to also be taken into account when measuring business performance. How you will be marked For P3, you will need to describe how an organisation s previous years data on sales income and costs can be used initially to monitor current business performance and assess its relative success based on current data. They will also need to explain how historical data can be used to detect trends, through the use of moving averages and appropriate indices. You should add some explanation of the use of this statistical information in forecasting future trends and business performance. P3 links with P4 and M2. Hints from the syllabus Accounting data: previous period (sales, production costs, profits); information from published financial reports Statistical information: changes over time; moving averages; seasonal variations; price indices, eg Retail Price Index (RPI); trends to assess and predict business performance Performance: ratio analysis; liquidity ratios (current ratio, liquid capital ratio); profitability ratios (gross profit mark-up, gross profit margin, net profit margin, overheads to sales margin, return on capital employed); efficiency (stock turnover days, debtors collection days, creditors payment days, fixed assets turnover ratio, net current asset turnover ratio); capital gearing; previous periods This task will enable you to achieve P3 Task 6: [M2]: Analyse the importance of accounting data and statistical information to assess and predict business performance. Explain and analyse using accounting data / ratios you have already calculated in this Unit - the trends / importance of including statistical data (such as RPI) and seasonal variances to assess and predict future business performance. Use this information to create a budget for the next year. How you will be marked For M2, learners will identify the different factors that can influence the figures used in a budget including the production, sales, costs and profits in previous accounting periods, changes over time, moving averages, seasonal variations, price indices and performance and trends detected in previous accounting periods. Hints from the syllabus Accounting data: previous period (sales, production costs, profits); information from published financial reports Statistical information: changes over time; moving averages; seasonal variations; price indices, eg Retail Price Index (RPI); trends to assess and predict business performance Performance: ratio analysis; liquidity ratios (current ratio, liquid capital ratio); profitability ratios (gross profit mark-up, gross profit margin, net profit margin overheads to sales margin, return on capital employed); efficiency (stock turnover days, debtors collection days, creditors payment days, fixed assets turnover ratio, net current asset turnover ratio); capital gearing; previous periods This task will enable you to achieve M2 Page 5 BTEC: National in Business - Unit 7: Management Accounting Level 3

22 Task 7: [P4]: Use budgetary techniques to prepare budgets for a selected organisation. Create a Spread-sheet in Excel showing 2 departmental budgets for your uncles business for 1 month. Use formulas as appropriate and link the departmental budgets to a master budget. (You must agree your business and departments with your lecturer) At the end of your master budget, explain how and why you split (apportioned) costs such as rent across several departments. You will submit this budget and be given actual figures from which you will calculate variances for this month. Create an annual budget showing monthly figures for your business. Write a short explanation and show how your current figures link with previous annual figures and take into account seasonality. Explain how your figures also tie in statistical data such as RPI/ inflation How you will be marked. For P4, you will be given a case study with some historical accounting information as well as an appropriate price index. You will calculate any relevant trend and then apply that trend when calculating the budgeted figures for a future accounting period. The budget might be for sales, production or cash. You should prepare a budget in an appropriate tabular format and should show evidence of having accurately calculated the moving average and applied a trend to the forecast figures. P4 links with criteria P3 and M2. Hints from the syllabus Budgets: master; sales; production; purchases; debtors; creditors; cash; departmental (consolidation); standard costing; analysis of variances, eg change of activity levels, costs and prices; use of accounting and statistical information Once you have accurately completed and passed the task 7 budget exercise, you will use the information for tasks 9 and 10 where you will analyse the budget you have completed and identify potential problems of the business and move further to suggest possible solutions. This task will enable you to achieve P4 Task 8: [P5]: Describe how budgets can be used to set targets, monitor and control an organisation. For Task 8 you are required to describe using audio delivery techniques, such as, mobile phone and audio head-set (MP3 files) - how budgets can be used to set targets, monitor and control your uncle s business organisation in the following areas: 1. Preparing and revising budgets (changes to costs and selling prices) 2. Use of budgets for short-term target setting 3. Monitoring (comparison of standard or budgeted costs with actual costs, calculation and explanation of variances) 4. Control measures (decision making, taking action) 5. Reliability (importance of accuracy, results of error, inaccurate assumptions) 6. Relationship between costs and incomes at different activity levels How you will be marked For P5, you will explain clearly the target-setting nature of preparing budgets and the subsequent monitoring process involving comparing budgeted figures with actual figures. You will emphasise the importance of calculating and analysing the variances, by trying to understand their likely causes, and you will need to explain how management action or decision-making will follow in order to compete the control. P5 links with D2. Hints from the syllabus Budgetary techniques: preparing and revising budgets (changes to costs and selling prices); use of budgets for shortterm target setting; monitoring (comparison of standard or budgeted costs with actual costs, calculation and explanation of variances); control measures (decision making, taking action); reliability (importance of accuracy, results of error, inaccurate assumptions); relationship between costs and incomes at different activity levels; This task will enable you to achieve P5 Task 9: [M3]: Analyse the impact on a budget of changes in costs and selling prices for a selected organisation. Analyse the budget for your uncle s business. Prepare budgets for your business based on the sales price of your items increasing by about 20% and also decreasing by about 20%. Also Prepare budgets for your business based on costs to your business increasing by about 20% and also decreasing by about 20%.Use the figures you have prepared for your task 8. (As a guide you should identify at least 2 issues from each and describe implication of this. In order to pass this section you must also make your report relevant to your selected business / industry.) Page 6 BTEC: National in Business - Unit 7: Management Accounting Level 3

23 How you will be marked For M3, you will identify the likely effects of changes that would occur in a budget if costs and selling price increased or decreased. Learners would base this on a budget prepared for P4 and they would be expected to identify cost increases causing increases in overall costs and reductions in profits. You would also be expected to identify that an increase in costs might require a change in selling price, where that price is based on cost plus. You might add that changes in costs would impact on the break-even point, necessitating an increase in budgeted activity levels to maintain profits. Hints from the syllabus Budgets: master; sales; production; purchases; debtors; creditors; cash; departmental (consolidation); standard costing; analysis of variances, eg change of activity levels, costs and prices; use of accounting and statistical information Comparison of standard or budgeted costs with actual costs, calculation and explanation of variances; control measures (decision making, taking action); Relationship between costs and incomes at different activity levels; This task will enable you to achieve M3 Task 10: [D2]: Evaluate the implications of budget variances for a selected organisation. Based on your uncle s business and the calculation of the variances, evaluate the implications of the variances. Explain what could have caused each variance, and what actions your uncle can take. Explain why your uncle should take these actions, this way hopefully his business performance improves and continues to improve in the future. Recommend and justify actions for them to help them improve their business. (As a guide your report should be approximately 1000 words and should give reasons for your recommendations). Be prepared for a viva of your work. (This will be in the form of a few questions to assess your understanding you will be given an appointment time to enable you to prepare for this). How you will be marked For D2, you are expected to suggest possible variances, such as an increase in direct materials costs, and to consider likely causes such as the purchase of faulty materials causing wastage. You should then go on to suggest, for each possible variance, suitable management decisions or actions such as changing the supplier or buying better-quality materials. This criterion could be gained through a case study where budgeted and actual figures are already given so that you have to calculate variances and make appropriate observations. You can be asked to work in a group and make a presentation. You must demonstrate a good understanding of the issues and the fact that this is probably the most important aspect of budgeting and budgetary control. Hints from the syllabus Budgets: master; sales; production; purchases; debtors; creditors; cash; departmental (consolidation); standard costing; analysis of variances, eg change of activity levels, costs and prices; use of accounting and statistical information Comparison of standard or budgeted costs with actual costs, calculation and explanation of variances; control measures (decision making, taking action); Relationship between costs and incomes at different activity levels; Reliability (importance of accuracy, results of error, inaccurate assumptions); relationship between costs and incomes at different activity levels; strengths and weaknesses of budgetary techniques This task will enable you to achieve D2 Page 7 BTEC: National in Business - Unit 7: Management Accounting Level 3

24 Sources of information BTEC L3 National in Business text book and the following website/s: Example of Unit 7 s scheme of work: This brief has been verified as being fit for purpose Assessor/s: David Hilton Grade: Pass / Merit / Distinction Signature: Date: Internal verifier: Signature: Student: Signature: Date: Date: Date: Page 8 BTEC: National in Business - Unit 7: Management Accounting Level 3

25 Applied Maths Lesson: Unit 7: Management Accounting Exercise Using data set-out in Financial Template Spread-sheet - Page 4 Evaluate: Assume: Selling Price = 30, Cost Price 10 Fixed Costs = (1/3 Direct Costs + 1/3 Indirect Costs) Variable Costs = 1/3 of Selling Price Total Costs = Fixed Costs + (Variable Cost x Number of Units) Total Revenue = (Selling Price x Number of Units) Page 1 of 5 BTEC: Extended Diploma in Business Level 3 Lecturer: Mr David Hilton

26 Your Uncle's budget for year: Jan Dec 2011 Month Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total Labour ,000 Materials Energy ,000 Direct Costs 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 90,000 Indirect Costs - Expenses/overheads Premises (rent, rates) Power (light, heat, electricity, gas) Telephone Insurance Postage and carriage Advertising Interest and bank charges payable Stationery Drawings, wages or salaries Equipment hire Motor expenses Accountancy fees Legal/professional fees Total expenses/overheads 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 42,480

27 Applied Maths Lesson: Unit 7: Management Accounting Exercise Using the data from exercise & supplied graph-paper to plot a Break Even Chart A B C D E F No of Units Selling Price Variable Costs Fixed Costs Total Costs Total Revenue Page 3 of 5 BTEC: Extended Diplomain Business Level 3 Lecturer: Mr David Hilton

28 Sales Revenue ( ) 14,000 12,000 10,000 Budgeted Activity Level = 11,000 8,000 Fixed Costs Total Costs Total Revenue Profit 6,000 Loss 4,000 Margin of Safety = 140 2, Units

29 What are the limitations of using the break-even technique? What inaccurate assumptions are made with regard to the relationships between cost and income when you use the break-even technique? Why might costs and income change in relation to one another at differing levels of activity? Why is it dangerous to assume that all products being made, or that could be made, will be sold? It appears that only one product is making a contribution. What might be the implications if another product was introduced that makes a different level of contribution?

30 Applied Maths Lesson: Unit 7: Management Accounting Exercise Using data set-out in Financial Template Spread-sheet - Page 4 Evaluate: Assume: Selling Price = 30, Cost Price 10 Fixed Costs = (1/3 Direct Costs + 1/3 Indirect Costs) Variable Costs = 1/3 of Selling Price Total Costs = Fixed Costs + (Variable Cost x Number of Units) Total Revenue = (Selling Price x Number of Units) Page 1 of 5 BTEC: Extended Diploma in Business Level 3 Lecturer: Mr David Hilton

31 Your Uncle's budget for year: Jan Dec 2011 Month Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total Labour ,000 Materials Energy ,000 Direct Costs 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 90,000 Indirect Costs - Expenses/overheads Premises (rent, rates) Power (light, heat, electricity, gas) Telephone Insurance Postage and carriage Advertising Interest and bank charges payable Stationery Drawings, wages or salaries Equipment hire Motor expenses Accountancy fees Legal/professional fees Total expenses/overheads 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 3,540 42,480

32 Applied Maths Lesson: Unit 7: Management Accounting Exercise Using the data from exercise & supplied graph-paper to plot a Break Even Chart A B C D E F No of Units Selling Price Variable Costs Fixed Costs Total Costs Total Revenue Page 3 of 5 BTEC: Extended Diplomain Business Level 3 Lecturer: Mr David Hilton

33 Sales Revenue ( ) 14,000 12,000 10,000 Budgeted Activity Level = 11,000 8,000 Fixed Costs Total Costs Total Revenue Profit 6,000 Loss 4,000 Margin of Safety = 140 2, Units

34 What might be the impact on the business if inflation were (a) to rise? What might be the impact on the business if inflation were (b) to fall? What might be the impact on the business if interest rates were (a) to rise? What might be the impact on the business if interest rates were (b) to fall?

35 Based on your uncle s business see budget blow: Page 1 of 2 Group 3 Embedded Maths Session David Hilton 30 th May 2012