BASC FINANCIAL PLAN FOR BUSINESS START-UP

please match the following:

• Costs that vary with production volume

• Variable Costs

• The amount of money you charge customer

• Selling Price

• Costs that do not change with production

• Fixed Costs

• Sales needed to cover costs

• Break-Even Point

A student group sells RM 10 bubble tea at a school event. Fixed costs (stall rental, permits) = RM 300. Variable cost per cup = RM 4. Calculate the break-even point in units.

• 45 cups

• 60 cups

• 50 cups

• 80 cups

Answer explanation

Break-Even Point = RM 300 / (RM 10 - RM 4) = 50 cups.

A student group sells RM 10 bubble tea at a school event. Fixed costs (stall rental, permits) = RM 300. Variable cost per cup = RM 4. Analyze how a 20% increase in variable costs (e.g., sugar price hike) would affect profitability.

• 48 cups

• 58 cups

• 50 cups

• 60 cups

Answer explanation

- New Variable Cost = RM 4 x 1.2 = RM 4.80

- New Break-Even = RM 300 / (RM 10 - RM 4.80) = ~58 cups

- Analysis: Higher variable costs reduce profit per unit, requiring more sales to break even. Profitability becomes harder unless prices increase.

You’re selling custom tote bags at a school event.

Fixed Costs: RM 150 (printing machine rental).

Variable Costs: RM 8 per bag (materials and labor).

Selling Price: RM 20 per bag.

Goal: Sell 50 bags.

Calculate total income, total costs, and profit.

• Income: RM 1,000
  Total Costs: RM 150
  Profit: RM 450

• Income: RM 1500
  Total Costs: RM 50
  Profit: RM 50

• Income: RM 1500
  Total Costs: RM 500
  Profit: RM 450

• Income: RM 1000
  Total Costs: RM 550
  Profit: RM 450

Answer explanation

Income: RM 1,000 (50 × RM 20).

Total Costs: RM 150 + (50 × RM 8) = RM 550.

Profit: RM 450.

Scenario:

You’re selling custom tote bags at a school event.

Fixed Costs: RM 150 (printing machine rental).

Variable Costs: RM 8 per bag (materials and labor).

Selling Price: RM 20 per bag.

Goal: Sell 50 bags. How many bags must you sell to break even?

• 13 bags

• 14 bags

• 10 bags

• 15 bags

Answer explanation

Break-Even Point = RM 150 / (RM 20 – RM 8) = 12.5 → 13 bags.

Scenario:

You’re selling custom tote bags at a school event.

Fixed Costs: RM 150 (printing machine rental).

Variable Costs: RM 8 per bag (materials and labor).

Selling Price: RM 20 per bag.

Goal: Sell 50 bags. What is the new profit if you reduce costs to RM 6 per bag?

• RM 550

• RM 450

• RM 500

• RM 600

Answer explanation

New Profit: RM 1,000 – [RM 150 + (50 × RM 6)] = RM 1,000 – RM 450 = RM 550.

Scenario:
Amina sells cupcakes at school events. Her fixed costs are RM 200 (equipment rental), and variable costs are RM 3 per cupcake (ingredients and packaging). She sells cupcakes for RM 8 each and plans to sell 100 units. Calculate her total profit.

• RM 500

• RM 300

• RM 400

• RM 600

Answer explanation

- Total Income = 100 × RM 8 = RM 800

- Total Costs = RM 200 + (100 × RM 3) = RM 500

- Profit = RM 800 – RM 500 = RM 300

Scenario:
Amina sells cupcakes at school events. Her fixed costs are RM 200 (equipment rental), and variable costs are RM 3 per cupcake (ingredients and packaging). She sells cupcakes for RM 8 each and plans to sell 100 units. If Amina’s sales drop to 80 cupcakes, how will this affect her profit? Explain the implications.

Answer explanation

- New Income = 80 × RM 8 = RM 640

- New Costs = RM 200 + (80 × RM 3) = RM 440

- New Profit = RM 640 – RM 440 = RM 200

- Analysis: Profit drops by RM 100; Amina risks not covering fixed costs if sales decline further.

Scenario:

Amina sells cupcakes at school events. Her fixed costs are RM 200 (equipment rental), and variable costs are RM 3 per cupcake (ingredients and packaging). She sells cupcakes for RM 8 each and plans to sell 100 units. Propose a solution to maintain her original profit target of RM 300 despite lower sales.

Answer explanation

Possible Solutions:

- Increase selling price (e.g., RM 9.50 per cupcake).

- Reduce variable costs (e.g., cheaper ingredients).

- Sell additional products (e.g., drinks) to boost income.

Scenario:

Zara’s budget for selling handmade bracelets:

Income: RM 600 (selling 60 bracelets at RM 10 each).

Expenses: RM 150 (materials) + RM 100 (marketing).

Profit: RM 350. Tasks:

a) Identify two errors in Zara’s budget.

b) Recalculate the profit with corrected expenses (add RM 50 for event fees and RM 5/unit labor cost).

c) Suggest how Zara can still achieve her RM 350 profit target.

Answer explanation

a) Errors:

1. Missing variable costs (e.g., labor).

2. Ignoring one-time costs (e.g., event fees).

b)- Total Expenses = RM 150 + RM 100 + RM 50 + (60 × RM 5) = RM 600
- Profit = RM 600 – RM 600 = RM 0

c)Solutions:
- Increase price to RM 12/bracelet.
- Reduce labor costs by recruiting volunteers.
- Sell 70 bracelets instead of 60.