SAMPLE. Resources for Courses

Transcription

1 Resources for Courses

2 Uncle Wongs Big Decision Resources for Courses Teacher Instructions This activity can be used to consolidate the teaching and learning of two key investment appraisal techniques (payback and ARR) as well as getting students to consider quantitative and qualitative factors when making a decision, in this case, the location of a new factory. The activity encourages students to use calculations to support their answer and students can also calculate: Profit Break-even Capacity Utilisation 1 Split the students into groups of 4 2 Give each group a copy of the scenario and a set of cards for both and 3 Encourage students to make calculations in order to provide numerical evidence to support their decision: 4 factory has a payback of 2 years and 2.4 months compared to 1 year and months for 5 Average rate of return for is : Total return 11-7 = 4m, Annual return = 4/3= 1.33m, ARR = 1.33/7 X 100 = 19% Average rate of return for is: = 2.7m, annual return = 2.7/3 = 0.9m, ARR = 0.9/6 x 100 = 15% 6 Profit for at full capacity is 6m x m = 5.5 Profit for at full capacity is 4m x m = Break even for is 2m/1.25 = 1.6m units, Break even for = 1.75m/1.35 = 1.29m units

3 Uncle Wongs Big Decision Resources for Courses 8 Capacity utilisation Yr 1 50% 50% Yr % 75% Yr % 87.5% 9 Labour productivity Yr 1 6, Yr Yr (Units per worker) 10 Students should be encouraged to consider both quantitative and qualitative factors when making a decision, for example: The travelling time to France from is 5 hours compared to 6 hours for. The perishable nature of the product means that delivery time from the factory to the supermarket must be less than 8 hours. Does the location allow for any delays in delivery? has a higher unemployment rate. This could make it easier to attract workers however there could be a trade off in terms of quality (of the workforce). Extension activity Ask the students to choose the 3 most important factors and get them to justify their choices. Pose some What if questions to get the students to debate whether it would affect their location decision, for example: The effect of a change in the /euro exchange rate. A large rush order from the French supermarket. A competitor opening a factory in either or.

4 Scenario Uncle Wong Foods is a manufacturer of chilled ready meals. They deliver to all the major supermarkets. Due to the perishable nature of the product, delivery time from the factory to the supermarket must be less than 8 hours. Uncle Wong Foods have expansion plans and have contracts to supply to a chain of French supermarkets. This will require them to increase their capacity and open a brand new factory. 2 potential sites have been chosen: or. Your task Consider the information cards for both and. Using this information decide which location Uncle Wong Foods should choose. You are advised to use calculations to support your decision.

5 4 hours 10% 1m 50 miles Initial cost 7m Fixed costs per year 2m Variable cost/unit 0.75 Selling price/unit 2 Year 1 2m Year 2 4m Year 3 5m 6 million units 2 5 hours

6 Year 1 3m Year 2 4m Year 3 5m 1 million units Year 1 10% Year 2 8% Year 3 5% 6 hours % 2m 30 miles Initial cost 6m Fixed costs per year 1.75m Variable cost/unit 0.65 Selling price/unit 2 4 million units

7 Year 1 3m Year 2 3.2m Year 3 2.5m 3 6 hours 0.5 million units 400 Year 1 2m Year 2 3m Year 3 3.5m Year 1 5% Year 2 3% Year 3 2%