Using Financial Information to Make Effective Decisions (OCR GCSE Business)

By volume and value

At full/reduced price

Trends and seasonality

Impact of marketing campaigns

Raw materials

Components

Other consumables

Supplier reliability and payment periods

Staffing, including labour turnover

Utilities

Property costs

Borrowing costs

Productivity

Wastage or faults

Returns and replacements

Machinery reliability

Customer service complaints

Sales have grown consistently over the last five years, almost doubling between 2020 and 2024

However, profit has been less consistent, dropping significantly in 2022This data may prompt discussions focused on the reasons for lower profitability

Both fixed and variable costs have risen over the five-year period

Variable costs should be compared to sales levels

• If the variable cost per unit has risen significantly, Sidney may consider seeking new suppliers for key raw materials such as seeds, compost and plant pots

Reasons for the rise in fixed costs should also be considered

• Sidney may look at aspects such as rent, utility bills and wage costs to identify potential savings

Rental costs have remained stable over the period, representing a relatively small proportion of fixed costs

• Sidney may consider how this level can be maintained at a low level

Both utilities and staff costs have risen significantly

• Sidney could look at ways to reduce utility costs, such as electricity, by seeking a new energy supplier or taking steps to reduce energy use

• He may also consider reducing the number of staff employed, as long as this does not affect customer service or quality

Output has increased over the five-year period, with wastage rates falling since 2022

• Sidney may use this data as evidence that his move towards automation has been successful

• He may decide to introduce further technology, though he must weigh up its initial cost and ongoing maintenance costs against its expected benefits

The number of staff employed has increased four-fold during the five-year period

An increasing proportion of staff have left the business each year

• Sidney may investigate ways to reduce staff turnover, such as increasing pay or improving non-financial benefits

• This may reduce staff costs, as there will be less need to recruit replacement workers

Although only two years' worth of data are considered, sales peak during the summer months, with low sales during the winter

Sidney may look at ways to ensure the business has adequate cash flow during the winter months

• He may arrange to use the overdraft facility provided by the business's bank

• He may carry out research into ways to increase sales, especially during the winter months

  • E.g. He may add Christmas trees to the product portfolio

• He may look at ways to reduce costs during the winter months

  • E.g. He may choose to employ workers during the

    peak summer season only