The role of Finance and Accounting in Business - Essay Example

Therefore, to sell at a breakeven price, 100 bags need to be sold. The amount of funding that need to be raised is $ 500. To get the number of bags that need to be sold to raise the $ 500 net income, we derive another equation by equating number of baskets to z. z*3 + (all the fixed costs) = z*5-$ 500……… (5). 3z +$ 200= 5z -$ 500 Bringing like terms together; $ 700= 2z which gives a z value of 350 bags. The total figure of 350 bags is not realistic since only 100 customers are available.

At this point, measures to trim down the charge of the bags. The marketing and distribution charges (advert, posters and vendor charges) add a significant percentage to the initial cost. The charges take 40% of the total cost. Although marketing and supply chain requires input, it should not add excessive expenditure in the total cost as it might lead to customer suppression in the final product price. To override the cost larger volumes of the commodity should be sold, as in the case scenario above.

If it was possible to sell all the 350 bags, the fixed costs would have no significant effect and the income would be generated. Since the customer number is limited to 100, other measures have to be taken to reduce the fixed charges or override them. Charges need to be prioritized according to necessity. Both posters and College newspaper adverts communicate the same thing. It would be wise to evaluate the most efficient means of capturing sales. If an advert is placed in the newspaper, it might not capture a lot of attention to students who do not read it.

It might, however, capture the attention of the staff. Posters, on the other hand, might do the trick when strategically placed within the college premises. They would be placed on all main notice boards, lecture rooms and corridors. These would easily catch the attention than a page in a newspaper. If only posters are used, the fixed charges will reduce by a considerable proportion. Considering the equation 2 above, the new cost would be $ 400. The net income will be $ 100. If the newspaper is favored than the posters, the net income amounts to $ 60.

In a scenario where both charges are scrapped, the only cost will be that of shipping the baskets and the new net income would be $ 160. However, this would jeopardize the sale due to low awareness. Still, a net income of $ 500 will not be realized. The other approach will be setting up a higher sale price for the basket. Since the purpose of the sales drive is to raise funds for scholarships, an exaggerated price would not necessarily have a negative impact. The valentines’ period is also characterized by increased spending.

By taking this position and selling the bags at a price of $ 9, while scrapping the newspaper and retaining the poster advert it would be possible to obtain the net income of $ 500 as shown in the equation below; Total cost = (3*100) + (cost of poster supplies$60) + (Vendor charges$ 40) = $ 400. Total sales= $9*100=$ 900 Net income = $900-$400=$500 The resulting price is triple the initial cost of the basket. This would have a risk of reducing the purchasing power especially if the role of the fundraiser is not elaborated enough. By