Week 4 Lecture Notes (Class 7+8)
Week 4 Lecture Notes (Class 7+8) BA 101
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This 4 page Class Notes was uploaded by howellkaila on Friday January 30, 2015. The Class Notes belongs to BA 101 at University of Oregon taught by Tom Durant in Winter2015. Since its upload, it has received 73 views. For similar materials see Intro to Business in Business at University of Oregon.
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Date Created: 01/30/15
Week 4 Lecture Notes Class 7 8 Class 7 Production and Performance In this class we worked mostly with becoming familiar with Foundation recommend reviewing the Class PowerPoint if you missed Class 7 Income Statement Revenue Price per unit X units sold Cost of Goods Sold COGS cost per unit X units sold Contribution Margin revenue COGS Operating This is the way in which you use your investments Operating Flow Chart Cash 9 Accounts Payable 9 Production this turns your cash into inventory 9 Inventory 9 Sales turns inventory into cash 9 Accounts Receivable 9 Cash Cash can also go towards Accounts payable you need to pay off what you owe Accounts Receivable is what your customers give you and this gives you more cash Inventory Component Parts Inventory Raw materials Work in Process Inventory self explanatory Finished Goods Inventory also self explanatory In Foundation all of the inventory is finished goods Too little inventory Results in a Stock Out This results in lost sales and you are essentially giving your business to the other companies Too much inventorv is expensive to hold on to and just becomes more desirable as you keep it Overall your cash is tied up and you are not able to spend money on what you want What you want is AT LEAST 1 unit of product left You DO NOT want more than 60 days left of inventory at the end of the year Take your sales forecast and divide it by 12 This gets you the 1 month total you plan to sell Now you add your total sales forecast This is the amount of units you should produce Sales Forecasting To get your Sales Forecast you want to find the Market growth forecast the Potential Forecast and the December Customer Survey Forecast After you find these you take the lowest of the 3 Forecasts and add two months worth of sales onto it Then you take the highest forecast of the original 3 and add one unit of product You now have these two new numbers What you want to do next is find the average of the two numbers This is your sales forecast Many things depend on the Sales Forecast How many units to produce Will you have to invest in capacity Cash management arket Growth Foreczit Sales you made last year X growth rate 0 IF YOU STOCKED OUT LAST YEAR ignore this forecast when trying to create your sales forecast Potential Market Share Foreczit Total Industry Demand X growth rate X potential market share percentage December Customer Survey Forecast Add all companies December Customer Survey Scores Divide your customer survey score but the total of DCS scores DCS Share Finally multiply the total unit demand by your DCS share score Capac y Capacity is how much you can produce in your first shift The more capacity the less you have to spend on Second overtime shifts You can produce up to twice the amount of the first shift You want to plan for the future because capacity takes a year to become effective l3alance Sheet Important things about the balance sheet Cash Accounts Receivable Inventory Plant and Equipment siness Activities Financing funds to start and grow a business Investing acquire assets to run a business Operating create goods and transactions Inventory 9 Cash Class 8 Capacitv Automation and Contribution Margin In this class we went over what we need for the midterm We also went over the expectation for Foundation If you need any information about this go look at the Class 8 PowerPoint in Blackboard COGS Cost of Goods Sold Unit Cost Material Cost Labor Cost 0 The cost to make one sensor Material Cost the cost of the stuff it takes to make your sensor 0 In low tech material cost is lower than in high tech Labor Cost how much it costs to pay people to assemble the sensors 0 You MUST know how much product you want to produce before dealing with labor costs because everything about labor costs is based upon that I Capacity how many sensors you can make in the first shift I Overtime when workers work for more money and more hours I Automation when machines take over the human workers For every level of automation you raise you lower labor cost 10 Inventory Carrying Cost the money it takes to hold your inventory Capacitv in Relation to Automation For each level of automation you add you are investing 400 per unit of capacity If you want to calculate the Total Contribution Margin at a certain automation level price of unit material cost labor cost contribution margin per unit Contribution Margin per unit price per unit contribution margin percentage Contribution Margin per unit X sales Total Contribution Margin Keep in mind a higher automation makes products take longer to reposition in RampD Low Tech Raise automation early High Tech Never go above automation level 3 Investing in Capacity You need to buy more floor space 600 X units more machinery 400 X level of automation X units Selling Capacity You shouldn39t need to do this but if you want to refer to the Class 8 PowerPoint on Blackboard