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2 Pie Factory Topic: Costs, Revenues and Profits Timing: minutes A fun whole class game Delivery Organise the class into 5 groups. Give out student instructions to start with. Let students read and then clarify what is going to happen next: they need to come up with a team name and a price per crate for their pies (between 1000 and 10000). They write both of these on a decision slip provided (or just use a piece of scrap paper) and the teacher collects these in. Meanwhile students must decide how many crates of pie they are to produce and they write this on their decision sheet along with their price in the shaded boxes for month 1. The teacher should put all prices collected on their desk and put in order low to high. The lowest priced team will receive an order for 10 crates and the next lowest 8. If there were two teams priced the same then average the orders so both teams are given orders for 9 crates if they are joint lowest. It is the teachers role to announce orders for each team. Orders go down from 10 to 8 to 6 to 4 to 2 and again any teams with the same price will have their orders averaged between them so if, for example 3 teams came up with the same second lowest price then we would average this so each team received orders for 6 crates (8+6+4 / 3 teams). Once the teacher orders have been given to each factory the students have to calculate their costs, revenues and profits on the profit and loss sheet. Students then begin the process again for month 2 by making a price decision and a production decision before the teacher gathers in each team s price and places the orders. Profit and loss sheets can then be completed and the rounds continue until the end of the game. After every round or two ask a few teams what their cumulative profit is to really get the competitive spirit going. This is an excellent game to discuss how revenue and costs are calculated while having a lot of fun in the process. Give a prize to the overall winning team if you feel so inclined. The teacher could also introduce or bring in some basic ratio analysis, for example, the teacher could ask the teams to work out their gross profit margin for the 6 month period and/ or their operating profit margin and compare it with the other 4 teams.

3 Pie Factory Player Instructions You are the directors of a business producing pies and are in competition with several other firms. You will need to come up with a new business name as you are about to compete for new custom and make as much profit as possible. The pies you manufacture will become stale and cannot be held for long. Any extra production of pies you make cannot be carried forward to the next month. Each month you simply make two decisions in your team: i) what price to charge the customer and ii) how many crates of pies to produce. Production Your first decision is how many crates to produce. Your company has fixed costs of 5000 per month and these have to be paid no matter how many crates of pies are made as they include costs such as rent. Your variable costs of making the pies are 1000 for every crate. When you calculate your production costs you need to add up the variable costs and fixed costs eg. the cost of making 4 crates of pies will be: Fixed cost 5000 Variable cost 4000 TOTAL COST 9000 Fill in the number of crates you wish to produce before each round on your decision form. Pricing The price you can charge per crate of pies must be between 1000 and 10,000 in units of Your teacher will be your customer and depending on your price will place orders of between 2 and 10 crates of pies. The team with the lowest price will gain orders of 10 crates, the next lowest price will gain 8 crates of orders, the next 6, the next 4 while the team with the highest price will gain orders of 2 crates of pies. If 2 or more teams have the same price then the teacher will average out the orders between the teams. On your decision form you will need to enter the price you are to charge and the orders you are given. However if you produced less crates than your customer demanded you must reduce your sales figure as you can only sell the amount made. Calculating profit Each round you can work out your profit by calculating sales revenue (price* number of crates ordered) and your profit (sales revenue total costs). Keep a running total of profit by adding previous months profits to this one in the cumulative profit row.

4 Company Name Decision Sheet (between 1,000 and 10,000) Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 to make (1 to 10 crates) ordered by customer (teacher will give this) Decision Sheet produced Variable costs (number produced x 1,000) Fixed costs Total costs (variable costs + fixed costs) Number of sales Month 1 Month 2 Month 3 Month 4 Month 5 Month Sales revenue (number of sales x price) Profit or loss (sales revenue total costs) Cumulative profit

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