Assignment Submission Form for FHI-WORKBOOK

FHI-WORKBOOK
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To be completed by Student
Learning Outcomes Assessment Criteria
(please tick as
appropriate)
Task No Evidence
(Page
Number)
LO1 Understand sources of
funding and income generation for
business and services industries
1.1 ☐ 1
1.2 ☐
2
LO2 Understand business in terms
of the elements of cost
2.1 ☐ 3
2.2 (A)
2.2 (B)
☐
☐
5/6
L05 Be able to apply the concept of
marginal costing
5.1 ☐ 4
LO3 Be able to evaluate business
accounts
AC 3.1 ☐ 7
AC 3.2 (A) ☐ 8
AC 3.2 (B) ☐ 9
AC 3.2 (C) ☐ 10
AC 3.3 ☐ 11
AC 3.4 A/B/C ☐ 12
LO4Be able to analyse business
performance by the application of
ratios
AC 4.1/4.2 ☐ 13
LO5
Be able to apply the concept of
Marginal costing
AC 5.2/5.3 ☐ 14
Task 1:

AC1.1 review 4 sources (2 internal and 2 external sources) of
funding available to business and services industries.
(maximum word count – 350/ at least 1 reference required)
Internal source of funds are generated from the internal sources and
external sources of funds are generated from 3rd part or outside sources. 2
internal sources of funding those are available to the service industries or
businesses are –
 Love money – love money or the money borrowed from spouse, family and friends is a
popular source of funding that is generally repaid once the business starts earning sufficient
profits. This arrangement can be cheaper and quicker and the terms of repayment may be
flexible as compared to bank loan. However, borrowing though love money may raise stress
for the entrepreneur, specifically if business does not perform well.
 Personal investment – while starting-up a business the owner himself or herself can
contribute to the business fund through cash or through collateral of his or her asset. It is
the most cost effective and easiest way of raising fund while raising fund from bank is
comparatively difficult (Brown and Lee 2019).
2 external sources of funding those are available to the service industries
or businesses are –
 Bank loan – it is widely used external source of fund for business and service industries. Bank
provides short term as well as long term loans to the business in exchange of interest
payment at specific rate to be paid on monthly or quarterly or annual basis. However, to
raise fund through bank loan the business shall have excellent credit score and sound track
records. Further, in case of start-up business the bank requires the personal guarantee or
collateral of asset from the entrepreneur.
 Angels – generally, angels are the retired company executives or the wealthy individuals
those invest in the small firms of others directly. Generally they are the leaders in their own
sector and hence they contribute their network for the contact as well as their skills and
knowledge. However, in exchange, they supervise the management practices of the business
that is they hold a position in the board of directors of the company (Dastory, Schäfer and
Stephan 2018).

Task 2:
AC1.2 evaluate the contribution made by a range of methods of
generating income within a given business and services
operation (maximum word count – 300 excluding calculation)
Different methods of generating the income help the business to generate
earnings from other sources if any particular source is not sufficient or stops
generating any further earnings. Various forms of generating the income from
service or business operation are as follows –
 Sales income or revenues – sales revenues are realized by the business through selling of the
products or providing services to the customers. For any business sales revenue is generally
the major source of income. Sales revenues are parted into gross sales that is, the total sales
and the net sales that is the sales reduced by the sales discounts, sales returns and any other
allowances.
 Sub-letting – rent received from the tenant under sublease is rental income from subletting
and it shall be reported as income. If tenant pays the expenses the receiver is obliged to pay
the same pursuant to lease and the payment from tenant is considered as income.
 Commission – commission income is the fees earned by the agents and brojers in making the
sales or in closing any deal. It is primary revenue account for stock brokers; real estate
brokers and insurance agencies.
 Sponsorship – sponsorship income received from a sponsor is popular way of income. It
refers to the support, whether in form of finance or in form of services and goods offered by
businesses or public members.
 Royalties – royalty income is the payment received in consideration of usage and
exploitation of the literary or artistic works, mineral rights or patents. It is dependent upon
the type of the business carried upon by the entity. It is generally of 2 types – royalties
received for usage of patents, trademarks or copyrights and royalties received for usage of
minerals, gas or oil (Cooper et al. 2016).
 Capital gains – capital gain is increase in value of any capital asset that provides it higher
value as compared to the asset’s purchase price. However, such gain is not reported until
asset is sold. Capital gain can be long-term as well as short term. It is a common practice for
many businesses to use the business profits for the purpose of investment. There always
exists a chance that the investment will earn profit in the form of capital gains. This generally
takes place in case when the entity buys and sells the stocks, invest in mutual funds or in real
estate. It can be considered as a big source for income and the applicable tax rate on capital
gain is different as compared to regular income (Sharma and Sharma 2017).
Contribution made by different methods for generating income –
Income Amount
Percent
age Ranking
Sales
revenue £ 200,000.00 40.40% 1
Subletting £ 35,000.00 7.07% 5
Commissio
n £ 22,000.00 4.44% 6

Sponsorshi
p £ 38,000.00 7.68% 4
Royalties £ 120,000.00 24.24% 2
Capital
gains £ 80,000.00 16.16% 3
Total £ 495,000.00
100.00
%

Task 3:
AC 2.1-Discuss what is meant by direct costs and indirect costs.
List all your business costs and identify which are direct costs
and which are indirect costs. (maximum word count 250)
Direct cost – Direct costs are defined as the costs those can be traced accurately
with the cost object easily. Here the cost object can be product, department or
any project. Generally the direct cost benefits the single cost object and hence,
segregation of any cost as indirect or as direct shall be done through taking into
consideration the cost object. However, any particular cost can be the direct cost
for one object whereas the same can be indirect for any other object. Most of the
direct costs are variable in nature; however, it may not be the case always. For
instance, supervisor’s salary for a particular month who only supervised
construction of a particular building is direct fixed cost that is incurred for the
building (Costabile et al. 2017).
Indirect cost – costs those cannot be allocated to any specific cost object
accurately is known as indirect cost. Indirect cost generally benefits the multiple
cost objects and hence, it is practically not possible to trace them accurately to
any individual product, department or project. Indirect costs do not differ
substantially within certain volumes of production or activities and are therefore
generally the indirect costs are of fixed nature (Thompson et al. 2016).
All the business costs of The Restaurant Group Plc include cost of sales,
administrative costs and interest cost. Here, costs of sales are direct costs and
the administrative costs and interest expenses are indirect costs.