Year 11 Economics The government has imposed new health and saftey laws. The cost of safety...

BUSINESS SIMULATIONYear 11 Economics

SITUATION 1

The government has imposed new health and saftey laws. The cost of safety training will be $30,000. You estimate this reduce stoppages and increase output by 5%

Do you1. Introduce the training2. Do nothing and risk a fine

OUTCOME

1. Option one Add $30,000 to your staff training costs Increase output by 500 units

2. Option two An inspector arrives and fines you

$10,000 Add $30,000 to training costs Increase output by 500 units

SITUATION 2

Your production manager wants to break up the task of making the skis into several smaller jobs and retrain the staff. Training costs will be $15,000 but output should increase by 20% and raw materials cost increases by $20,000

Do you1. Introduce the change2. Do nothing

OUTCOME

1. Option one Increase output by 2000 units Increase training costs by $15,000 Increase raw materials cost by $20,000

2. Option two No changes

SITUATION 3

You are considering installing sprinklers and improving fire safety. This will cost $12,000. You estimate the risk of fire is <2%

Do you1. Install sprinklers2. Do nothing

OUTCOME

1. Option one Add $12,000 to other costs

2. Option two There is no fire but your insurance

company is not happy and increases your insurance premium by $10,000

SITUATION 4

Due to the removal of import barriers the local market is flooded by cheap skis from overseas. You consider increasing advertising which will cost $60,000

Do you1. Advertise2. Not advertise

OUTCOME

1. Option one Increase advertising costs by $60,000

2. Option two The flood of cheap imports forces you to

cut your price to $145

SITUATION 5

Your factory staff are demanding a 10% pay rise or they will strike. If they do strike your annual output will fall by 10% from last year.

Do you1. Accept the pay rise2. Ignore the threat

OUTCOME

1. Option one Increase wage costs by $15,000

2. Option two The strike does not work and they return

to work. However output falls by 1000 units

SITUATION 6

Your molding machine is getting old and causing an estimated 5% reduction in output. A new machine will increase output by 200 units but will cost $25,000 a year to lease. It will also effect the cost of raw materials

Do you1. Lease the machine2. Keep using the old machine

OUTCOME

1. Option one Increase output by 200 units Increase lease costs machinery by

$25,000 Increase raw materials cost by $4,000

2. Option two Reduce output by 500 It keeps breaking down so increase other

costs by $5,000

SITUATION 7

You want to buy the warehouse next door so you can earn money from leasing it out. The lease income is $90,000 per year. You will need to borrow $500,000 and 8% interest

Do you1. Buy the warehouse2. Not buy the warehouse

OUTCOME

1. Option one Increase other revenue by $90,000 Increase interest payments by $40,000

2. Option two No changes

SITUATION 8

You want to expand your business by taking over a rival ski maker who has closed. This will increase wages costs by $100,000, rent $20,000, freight by $10,000, machinery by $10,000, raw materials by $120,000, power by $2,000, staff training by $5,000 but will also increase sales by 10,000 and help you compete with the increasing imports of skis from overseas.

Do you1. Expand2. Not expand

OUTCOME

1. Option one Rent up by $20,000 / Lease machinery up

$10,000 / Wages up $100,000 / Raw materials up $120,000 / Freight up $10,000 / Staff training up $5,000 / Power up $5,000 / Output up 1,000

However increased supply from overseas pushes the price down to $130

2. Option two Increase supply pushes the price down to

$130