Entrepreneurship
This domain covers business planning, costing, pricing, break-even, inventory, customer service, marketing, GST and record keeping for an automotive workshop or spare-parts business. The exam tests practical commercial decisions.
Core rules
Separate fixed costs from variable costs. Fixed costs do not change with volume, such as rent and salaries; variable costs rise with each job, such as parts and consumables. Contribution per job is selling price minus variable cost. Break-even quantity is fixed costs divided by contribution. Price must cover direct cost, overhead and a margin, while remaining competitive. Keep job cards, invoices, purchase records and GST records. Manage inventory by turnover and avoid dead stock. Customer service includes clear estimates, punctuality and warranty handling.
Worked example
A workshop has monthly fixed costs of 60,000. A standard service sells for 500 and has variable costs of 300 for oil, filter and consumables. Contribution is 500 - 300 = 200 per service. Break-even is 60,000 / 200 = 300 services per month. If the workshop completes 360 services, profit before tax is (360 x 200) - 60,000 = 12,000. A discount to 450 would reduce contribution to 150 and raise break-even to 400 services.
Traps
Confusing revenue with profit; ignoring GST when quoting; treating owner's drawings as a business expense; and pricing only against a competitor without knowing your own cost. Underpricing labour is a common reason small workshops fail.