Page 86 - Bisiness Studies_Form_3

Business Studies for Secondary Schools

Appendices:

Appendix 1: Assumptions

The underlying assumptions are as follows:
1. The selling price of the broiler chicken will be TShs 7,000 for the first two years
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and TShs 7,500 in the third year;
2. In the first year of operation, 7,200 chickens will be produced. In the second year of
operation, the production level rises from 7,200 to 8,000 chickens as the business
anticipates more customers. As more customers are coming in, the third year’s
production is expected to rise further to 10,000 chickens;
3. The business is expecting to buy chicks from suppliers at a price of TShs 2,000
per chick for the first two years. In the third year of operation, the business is
anticipating benefits from bulk purchases and enjoying a discount of TShs 100 per
chick;

4. The average cost of feeding a chick to a full-grown chicken is estimated to be TShs
2,850. Changes in market price are anticipated to increase chicken feed expenses
in the third year to an average of TShs 3,250 per chick;

5. Wages for the two employees will be TShs 200,000 per month divided equally
between them in the first two years and are expected to rise to TShs 300,000 in the
third year. Similarly, the salary for the managing partner will be TShs 400,000 in
the first two years and rise to TShs 500,000 in the third year. Other operating costs
will be TShs 370,000 per month in the first two years and expected to rise to TShs
485,000 in the third year.

6. It is assumed that the supplier adds ten chicks to every batch of chicks purchased.
The same number of chicks is assumed to perish in the process, and as a result, the
same number of chickens is sold as the number of chicks bought.
7. The tax rate is 22.5 percent charged to each partner’s allocations.

Student’s Book Form Three 78