The Faculty Of Veterinary Science At Onderstepoort Accounting Essay

The Faculty of Veterinary Science at Onderstepoort ( FVS-OP ) , is the lone Veterinary Faculty in South Africa, and is situated about 15km from Pretoria ( CBD ) . FVS-OP is responsible for the preparation of veterinaries and veterinary nurses, every bit good as graduate student pupils in a figure of subjects.There are legion different research labs at OP, but for the intent of this undertaking, the focal point will fall on the research labs of the Department of Veterinary Tropical Diseases ( DVTD ) . The staying research labs are excluded from this undertaking due to clip restraints. Figure 1 illustrates the construction of the research labs at DVTD.The research labs at the module map in a support function for preparation and research. A figure of these research labs besides engage in external service bringing, which may be divided into three cardinal service classs.

These classs consist of the commercial scene, the interdepartmental service bringing scene and the research scene. Figure 2 represents the three different service scenes.Figure 1: Representation of the Laboratories of the Department of Veterinary Tropical Diseases

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Classs of the Service bringing by the Labs at the Faculty of Veterinary Science at Onderstepoort

Commercial SettingResearch PutingInterdepartmental PutingFellow Veterinarians from the Veterinarian industryIndividuals/ Representatives of assorted extra industriesPostgraduate pupils from the University of Pretoria or any other third establishmentIndividuals/representatives/businesses etc. from the populace sectorOnderstepoort Veterinary Academic Hospital ( OVAH )Figure 2: Representation of Service Categories


The Faculty represents a typical service operations system. Service rendering has certain features that differentiates it from fabricating. Despite some huge differences among different services and definitional jobs, there are so some features that many services portion. These features are listed in Table 1 together with the typical accompaniment operations troubles.



IntangibilityServicess can non easy be displayed, demonstrated or communicatedIt is hard to find monetary valuesPatent rights are hard to obtainPerishabilityServicess can non be kept in stock listHeterogeneityIt is hard to standardise servicesQuality control is hardIndivisibilityThere is interaction between the client and the service system, and besides with the service environmentThe client may be portion of the service or the service procedureThe division between selling, human resource direction and operations direction is obscureTable 1: Features of service operations systems and the accompaniment challenges ( Adendorff & A ; De Wit, 2003:13 )Harmonizing to Adendorff and De Wit ( 2003:4 ) “ aˆ¦.

.the operations direction systems found in all concerns will hold certain features in common, irrespective of the nature of the merchandise or service supplied. ” A typical theoretical account for a service system consists of inputs, a transmutation procedure and end products. The diagram in Figure 3 illustrates how the service supplied by FVS-OP can be applied to this theoretical account.

Information feedback regarding serviceInteraction with market act uponing the system through credence or rejection of products/servicesEnvironmental factors act uponing input to the systemFigure 3: Illustration of how the service supplied by FVS-OP can be applied to this service operation theoretical account.The services rendered by the research labs comprise a huge figure of different procedures, processs and diagnostic trials. The types of service delivered depend on the demand expressed by the client who falls into one of the three specified service classs ; the client ‘s petition is later allocated to an adequate/applicable/specific research lab.The same services are available to clients from all three classs.

However, the service fee charged differs between these service scenes. The current job becomes obvious when sing the fact that these differences are non based on any scientific techniques, peculiar fiscal theoretical account or expression, but instead on unseasoned premises and appraisals.Whilst operation by agencies of such unstructured methodological analysiss, the fiscal position and therefore viability of the research labs is ill-defined compromising any determinations taken by the direction squad. The Faculty is besides unsure of their concern authorization sing their fiscal purpose, it is open whether their aim is to interrupt even or to do a net income. This aim may besides differ between the three service scenes. These facts leads to the job of the research labs inter alia non being able to invent an appropriate pricing scheme for their services, making appropriate capacity planning ( both fixed and variable ) or explicating a selling scheme.

“ A research lab is non a cost-center anymore it ‘s a net income centre. ” ( Biomed Systems, 2009: ? ? ) Therefore, an chance arises to help the laboratory direction with respects to the identified jobs, by look intoing their operations, procedures and fiscal informations with a position to developing an appropriate fiscal theoretical account for assorted scenarios, with the intent of these research labs working as a profitable and/or sustainable establishment.

Undertaking PURPOSE

The intent of this undertaking is to work out the concern and direction jobs faced by the Faculty of Veterinary Science at Onderstepoort, with respect to their fiscal position and pricing scheme, as described in the undertaking range.


The aims of the research undertaking are as follows. ( moet ek hierdie in paragrawe uitskryf liewer? )

To work out the concern and fiscal jobs faced by FVS-OP.

To help the direction squad to understand the beginnings of income applicable to the six research labs.To help the direction squad to understand the existent cost of running the research labs by carry oning a cost analysis and showing the consequences.To place the job countries in the running of the research labs from a fiscal every bit good as an operational position.To invent a demand calculating theoretical account for the services provided by the research labs.To develop a additive scheduling theoretical account for the pricing scheme and to carry on a sensitiveness analysis with the usage of operations research methods, in order to optimise the cost allotment to different services provided by the research labs and to carry on a sensitiveness analysis on the pricing of the services provided.

( heated ek hierdie reg gestel? )To help the direction squad by agencies of a procedure for one-year planning and budgeting of the operations at the research labs, as an end product signifier the mathematical plan.To utilize the tools and findings developed, to find other countries for betterment, for illustration possible capacity restraints, readying of the direction budget etc.


There are a few restrictions to carry oning this undertaking of which most relate to the information which need to be analyzed. These restrictions are as follows.Sum of informations availableCorrectness of informationsApplicability of informationsHandiness of people as information resourcesCorrectness of information provided by the Faculty staff

Chapter 2



Ek gaan dice drumhead skryf as Prof Se dice hele lit reappraisal is reg, en dot is heeltemal klaarThe purpose of the full literature survey is to research and place the appropriate methodological analysiss to use in order to develop a fiscal theoretical account for the job at manus.

2.2 INDUSTRIAL Technology:

As shown in the diagram in Figure 4, Industrial Engineering integrates accomplishments and cognition from three different Fieldss of scientific discipline, which includes: Technical Sciences, Human Sciences and Economic Scienceshypertext transfer protocol: //www. 4: Industrial Engineering defined ( www.kwaliteg., accessed 6 May 2010 )Harmonizing to the South African Institute of Industrial Engineering (

za ) “ Modern Industrial Engineering is concerned with the integrating of resources and procedures into cohesive schemes, constructions and systems for the effectual and efficient production of quality goods and services. ”Additionally, the BNet Business Dictionary ( hypertext transfer protocol: // ) defines Industrial Engineering as: “ aˆ¦aˆ¦an applied scientific discipline subject concerned with the anticipation, planning, rating, and betterment of company effectivity. The intent of industrial technology is to maximise efficiency, quality, and production through the best usage of forces, stuffs, installations, and equipment.

”For the intent of this undertaking it will pull upon specialised cognition and accomplishments in the economic ( with focal point on fiscal ) and direction scientific disciplines and blend it with technology analysis methods and rules in order to happen an optimum and practical solution to the job at manus. Therefore the focal point fill be on ; planning, measuring and foretelling patterning techniques, in order to find and maximise FVS-OP ‘s efficiency, feasibleness and profitableness of their services rendered.



“ Operations direction is defined as the direction of the direct resources necessary to make the merchandises and services supplied or provided by a concern ” ( Adendorff and De Witt 2003:2 )Harmonizing to Adendorff and De Witt ( 2003:6 ) direction maps such as planning, forming, control and leading is taken as points of going in order to explicate the undertakings of an operations director in wide footings. All of these maps require determination devising from the operations director.The described job is a typical decision-making job and there are assorted factors to see when trying to do the optimum determination. These factors include a sufficient job statement, explicating a theoretical account, bring forthing assorted solutions for the job and taking the most appropriate, so implementing the determination and supervising the consequences.Assorted tools are available when trying to work out jobs which include utilizing theoretical accounts, quantitative solution methods and the systems attack.

From an operations director point of position, every bit good as from an industrial attack, mathematical theoretical accounts are the most applicable and of import job resolution technique. When covering with technology jobs the most appropriate method is normally to take a scientific attack, therefore using tools such as mathematical theoretical accounts. Conventional theoretical accounts such as a procedure map, flow charts, graphs and diagrams can be used in add-on, to portray thoughts, procedures and methods.Kosy ( 1984: ? ? ) explains that a fiscal theoretical account is a representation of the activities of a concern in footings of quantitative relationships among fiscal variables. Fiscal variables are variables that have some economic or accounting significance and the relationships among them can by and large be expressed by expressions and conditional statements.

Kaye ( 1994:69 ) lists the seven phases of the patterning procedure as follows:Problem definitionProblem analysisParameter appraisalSpecification of the theoretical accountEncoding the theoretical accountTesting the theoretical accountExecutionResulting from inaccurate and inefficient planning, prediction, fiscal management/management accounting and operations direction, or the entire deficiency thereof, the demand for an operations direction job solution exists. A combination of the above mentioned job work outing techniques will be applied, including the usage of theoretical accounts and the quantitative solution methods. The purpose is to develop an all embracing fiscal theoretical account aimed at the operations of the research labs at FVS-OP. The development of a fiscal theoretical account for the research labs will turn to the undermentioned countries:Management accounting/Financial ManagementCost accounting/Cost analysisAnalysis of fiscal statementsDemand directionDemand predictionBreak-even analysisOperationss ResearchAppropriate mathematical theoretical account to maximise net incomes / minimize losingss by doing usage of additive programming methods.The theoretical account should be practical and utile providing chances for uninterrupted betterment and promote alteration in the establishment ‘s fiscal capacity. The theoretical account should be developed in such a manner that it can be applied to each of the six research labs.


Harmonizing to Whiteley ( 2004: .

? ? ? ) finance is one of the most of import resources of a concern, or so any organisation. And the key to direction of any resource is the ability to take control of it.Management accounting can supply us with of import information on the behaviour of the house, peculiarly the cost and production map.

The accountant prepares balance sheets, net income and loss histories and financess flow statements, which represent both inactive and dynamic theoretical accounts of the house. These pro-forma statements supply a consistent window through which to see the fiscal advancement of the house.Harmonizing to Kaye ( 1994:24 ) the accounting theoretical account is based on historical informations collected procedurally and uses deterministic logic. It provides comparative and analytical information through tendencies and ratios. Improvements in direction accounting pattern have frequently resulted from techniques from operational research, for illustration probabilistic budgeting and determination trees.With respects to this undertaking, applicable fiscal direction techniques are identified, which should be applied in order to acquire an overview of the establishment ‘s fiscal place. :In order to analyse the house ‘s fiscal place, you have to place the key countries where fiscal direction has an input into direction determination devising.These countries are pointed out ( Whiteley 2004: six ) as follows:Selling and PricingCost accounting and Management AccountingHazard directionSing against hazardFraud barTax conformity and planningHonoring employeesTreasury directionForecastingBudgetingInternal and fiscal controlsAudit – external and internalAnalysis of fiscal statementsFiscal coverageThe undermentioned cardinal countries are identified as applicable to this undertaking and will be reviewed and researched consequently.

Cost and direction accountingForecastingAnalysis of fiscal statementsPricing



The history of cost accounting is given by Morse ( 1978 ) ‘Cost accounting paralleled the development of fabricating engineering and additions in concern size. Its beginnings are in technology and fiscal accounting ‘ . In add-on Baggot ( 1973:1 ) provinces that cost accounting is an of import tool for concern direction to utilize as a decision-making standard.

“ With lifting monetary values and increased competition, service companies are happening that cognizing the costs of their merchandises and services is critical to their wellness, if non to their being ” 1978 Sep-Oct ; 56 ( 5 ) :132-40. , dearden J, “ cost accounting comes to service industries ” Purpose and usage of cost accounting / cost analysis

“ Initially, it is possible to place three separate elements of cost, viz.

, stuffs, labour and services for which the maker must pay ” , ( Baggot, 1973:5 )Harmonizing to Whiteley ( 2004:90 ) cost accounting is concerned with the finding of costs for single units of production of end product. Whiteley ( 2004:90 ) farther states that: “ if the concern knows how much each point has cost, it so knows how much, if any, net income, is made on its sale. ” Cost accounting straight addresses the job of the inquiry about FVS-OP ‘s fiscal position.

Harmonizing to Morse ( 1978: ? ? ? ) cost accounting besides aids in the planning and control of ongoing operations, particular determinations such as the development of pricing policy or the rating of alternate actions, and external coverage ‘ . By ciphering the costs of each of the trials performed, the operations can be analyzed and recommendations can be made with respects to the monetary value puting scheme, while including operations research which will be discusses subsequently. Based on the consequences, a determination must be made, whether or non to go on executing these trials or to increase the monetary value charged to clients. Another option is to place countries where costs can be minimized /reduced. Methods, tools and techniques

Harmonizing to Hernandez ( 2003:440 ) comparatively few surveies address the cost-effectiveness of research lab testing, particularly the cost-effectiveness beyond covering with direct and indirect costs in the research lab. However, methods/strategies have been identified on cost accounting and effectivity in the concern and service sector.One of the cardinal constructs identified sing cost accounting ( Wood 1985:4 ) is that of the cost Centre, which is the smallest unit of production for which costs can be allocated. It can be applied to a procedure, a individual point or a batch of points.

Harmonizing to Wood ( 1985:9 ) and assorted other surveies it is of import to place and specify different types of cost:Direct Costss: Costss that can be traced to a individual cost Centre ( Salaries, stuffs, resources etc. )Indirect Costss: costs that are non straight traceable to a cost Centre.Fixed Costss: Costss that do n’t change with the volume or degree of activity.Variable Costss: Costss that change proportionately with alterations in volume, that is, the degree of activity.Overhead Costss: Includes all indirect production costs, that is, all production costs other than direct stuff and direct labour.Note: The amount of direct and indirect costs peers to the entire cost, moreover the amount of fixed costs and variable costs besides equals to the entire cost, but they are non the same. Direct costs can both be a fixed or a variable cost.

Whiteley ( 2004:91 ) describes 4 methods of costing:Standard Costing: Standard costing is a method which calculates a cost for each point of production under standard conditions. This consists of variable and fixed costs.Absorption Costing: method in which the fixed costs are allocated in proportion to the figure of direct labour hours.Activity based Costing: attempts to set up in greater item the true cost constructions of cost centres – that is, procedures, batches, points etc. This method allocates fixed costs on a more appropriate footing than direct labour hours.Throughput Costing: This type of bing applies to fabrication workss and efforts to supply relevant cost information, by placing constrictions in the production works.In an article published online, Brezmes et Al.

( 2002, p. ) undertook a survey to gauge the cost of each of the trials performed in the clinical microbiology research lab of a general infirmary by doing usage of the work load registry method of the college of American diagnosticians ( CAP ) . This method falls into the soaking up bing class and places a batch of accent on the work load attach toing each trial. Table 2 represents an infusion from the survey.

( nie seker of hierdie item nodig is nie )

Microbiological merchandise

CAP codification


Consumable stuff cost

Time units ( hours )


Cost ( euros )


Urine Culture875301.70Accessioning of specimen and designation0.31Automated uranalysis810024.00Automated uranalysis0.

26Sheep blood agar875322.00Inoculation of 2 pieces of media0.26MacConkey agar875422.00Reading of 2 normally unfertile sample home bases875502.00Recording and coverage of consequences11.

70 ( sum )0.82 ( sum )Table 2 Example of Workload and consumable stuff costs of a microbiological merchandise

For each merchandise the undermentioned costs were calculated:

Direct forces costIndirect forces costDirect stuff costIndirect stuff costConsumable costCare costTechnical and Administrative Staff costStaying research lab cost ( capital and structural cost )In decision to the survey, it is noted that the existent cost of a merchandise is the amount of allocated direct costs and indirect costs.Therefore the undermentioned computations and decisions could be made from this survey:Calculation of the mean work load per merchandiseForces costDirect stuff CostssCalculation of planetary disbursalsActual costs of trials performedThe consequences of this bing analysis was used to find the profitableness of this research lab and besides used in the monetary value puting scheme for the trials performed by this lab.



2.1 Introduction

“ The fiscal statements step public presentation and state where a concern base in fiscal footings ” ( Harrison and Horngren 2005:5 ) .


4.2.2 Purpose and usage of fiscal statement analysis

The chief intent of fiscal statements is to bespeak the profitableness of an institution/business/company. The applicable fiscal statements for internal analysis are known as direction histories.Whiteley ( 2004 ) describes different types of direction histories, which are used for internal analysis:A net income and loss history includes the followers:Income: Shows the gross income ( turnover ) from gross revenues of merchandises or services rendered.Direct Costss: Cost of Gross salessOverhead Expenses: Categorizes different types of disbursals ( for illustration: Administration, Transport, Finances etc.

) .The net income and loss history shows the consequence of the concern activities for the given period, and most significantly whether the history consequence is a shortage or a excessTable 3 is an illustration of a simple net income and loss history.

Net income and Loss Account for the twelvemonth ended 31st December 2004


Current twelvemonth

Previous twelvemonth


R ( million )

R ( million )

R ( million )

R ( million )






Cost of Servicess



Gross Net income



Other Income






Operating expenses



Nett Net income












Retained Net income




33Table 3: Presentation of a Net income and Loss Account


Indicates the fiscal place of the concern, at the concluding day of the month for which the net income and loss history is prepared.Includes the followers:Capital: Nett assets of the concernFixed Assetss: Long term assets of the concernDepreciation: All fixed assets are capable to depreciationCurrent Assetss: Short term assets of the concernCurrent Liabilitiess: Short term liabilitiesLong-run liabilities: Liabilitiess due for payment more than one twelvemonth after the balance sheet day of the month.Table 4 is an illustration of a simple Balance Sheet.

Balance sheet as at 31st December 2004


Current Year

Previous Year


R ( million )

R ( million )

R ( million )

R ( million )

Fixed Assetss





Current Assetss





Current Liabilitiess





Working Capital










Long term liabilities










Nett assets















Share capital





Share premium





Net income and loss history




200Table 4 Presentation of a Balance Sheet’Figures in histories are non merely Numberss on a piece of paper. They represent something substantial – something that has happened in the existent universe. Detecting what they mean is a critical tool in exerting fiscal control ‘ , ( Whiteley, 2004, p. )


3 Methods, tools and techniques

Whiteley ( 2004 ) describes the utility of calculating cardinal ratios and carry oning a statistical analysis, ‘By comparing different figures within the set of histories, certain cardinal ratios and relationships can be measured. This may supply utile information in finding the profitableness of the establishment ‘ .The statistical analysis of the fiscal statement is necessary in order to obtain necessary information and acquire the intended consequences, this includes the computation of certain cardinal ratios.

Net income Ratios

where a = gross revenues turnovervitamin E = cost of gross revenuesf = gross net incomep = net net income

Liquidity ratios

‘The figures do non be on their ain. They are at their most utile when shown in comparing to something else.

The most common comparings are between the current and matching old accounting periods, and of existent with budgeted figures ‘ ( Whiteley, 2004, p9 ) .By analysing the fiscal statements of FVS-OP it will be possible to find their fiscal province.


2.5.1 Prediction: ( moet ek hier verwys na decease rekenaar plan wat ek gaan gebruik om dice calculating mee Te doen? ? )


5.1.1 Introduction

“ Every twenty-four hours, directors make determinations without cognizing what will go on in the hereafter. Making good estimations is the chief intent of prediction.

” ( Murdick et al. 1990:47 )


1.2 Purpose and usage of prediction

Demand prediction in a service operations direction system such as FVS-OP, involves gauging future demand for the services rendered and should be used as an technology tool to cut down the hazard in determination devising. Assorted calculating techniques exist and in order to use the most applicable technique to the Faculty, it is of import to ab initio reexamine some of the common features of the different prediction techniques as discussed by Adendorff and De Wit ( 2003:97 ) .Forecasting techniques by and large accept that the causative effects that prevailed in the yesteryear will go on in the hereafter.

Prognosiss are seldom perfect, so that the existent demand will about ever vary signifier the projected demand.Prognosiss for point or merchandise groups are frequently more accurate than prognosiss for single points. However, the pick of such groups is critical to the success of the prognosis.The truth of a prognosis declines s the prognosis skyline lengthens.

This implies that prognosis for the close hereafter are more accurate than prognosiss over the long tally.Adendorff and De Witt ( 2003:98 ) further provide the stairss to follow in the demand calculating procedure:Determine the aim of the prognosis and the minute when it is needed.Determine the clip skyline involved in the prognosis.Choose a suited prediction technique.Gather and analyze relevant informations.Monitor the prognosis to find whether it is executing accurately ( If non, adapt the procedure to get at a revised prognosis ) .Murdick et Al.

( 1990:50 ) points out that the pick of calculating method, like most operating determinations, is an economic 1. Thus the undermentioned factors need to be taken into history prior to taking the appropriate prediction technique.Time:Span of the prognosisUrgency with which the prognosis is neededFrequency that updates must be madeResource Requirements:Mathematical edification available to the companyComputer resourcesFiscal resourcesInput signal features:Antecedent informations handinessVariability of fluctuation scope and frequenceExternal stablenessOutput features required:Detail or grade of disaggregationAccuracyHarmonizing to Adendorff and De Wit ( 2003:95 ) the demand for a product/service is related to the form exhibited over a certain class of clip. These constituents consist of:MeanTendencySeasonal consequenceCyclic factorRandom fluctuations Methods, tools and techniques

Categorization of calculating methods:There are assorted types of prediction methods, of which the followers are applicable to Demand Forecasting as noted by Fitzsimmons et Al.

( 2006:324 ) :

Causal theoretical accounts

Arrested development theoretical accounts: Estimates produced from a prognostic equation derived by minimising the residuary discrepancy of one or more forecaster ( independent ) variables.

Time series theoretical accounts

Traveling mean theoretical accounts: Recent values of the prognosis variables averaged to foretell future results.Exponential smoothing theoretical accounts: An estimation for the coming period based on a invariably weighted combination of the prognosis estimation for the old period and the most recent result.

Savage ( 2003:155 ) describes causal calculating as a method which determines the extent to which alterations in one measure cause alterations in another. Whereas clip series analysis is described as a method where hereafter values of some measure is predicted based on past values of the same measure. Sing the aims of this undertaking clip series method appear most applicable and will be discussed in more item.The moving norm theoretical accounts which is classified as a clip series theoretical account, is used when the premise can be made that the demand for services will remain reasonably steady over clip. Equation 1 serves as a mathematical presentation of this type of theoretical account.

( 1 )

Where N is the figure of periods in the moving norm

An version to the traveling mean theoretical account is the leaden moving mean theoretical account, which is applied when a tendency or form in the demand has been identified.

By utilizing weights more accent can be placed on recent values. Equation 2 serves as a mathematical presentation of this type of theoretical account.

( 2 )

Problems refering traveling mean theoretical accounts include a lag consequence when measured against existent information. Another job becomes evident, when increasing the size of N to smooth out fluctuations consequences in a theoretical account which is less sensitive to existent alterations in the information.

Adendorff and De Wit ( 2003:101 ) describe exponential smoothing as a fluctuation of the moving norm technique where the prognosis for the following period is arrived at by ciphering a moving norm for a figure of old periods. This theoretical account makes usage of a smoothing invariable which is presented by the variable I± which is used to weigh informations. The value for I± is found by agencies of experimentation, and should stand for a value between 0 and 1. Harmonizing to Wild ( 2002:172 ) a low I± value consequences in a consistent prognosis, whilst a high I± value consequences in a prognosis which is reactive to alter. Equation 3 serves as mathematical representation for this type of theoretical account.

( 3 )

where = the new prognosis

= the old prognosis

I± = smoothing invariable ( 0 a‰¤ I± a‰¤ 1 )

= old period ‘s existent demand

Simple exponential smoothing fails to react to tendencies, therefore Exponential Smoothing with Trend Adjustment should be applied in concurrence with simple exponential smoothing, when the informations used exhibits a tendency. An add-on to the simple exponential smoothing theoretical account is the smoothing changeless I? which is used to smooth out the tendency. Equation 4 serves as a mathematical representation for this type of theoretical account.

( 4 )

where = smoothed tendency for period T

= smoothed tendency for old period

= tendency smoothing changeless

= simple exponential smoothed prognosis for period T

= prognosis for old period


Forecast including tendency ( ( 5 )

Fitzsimmons and Fitzsimmons explain that simple exponential smoothing can be extended to account for seasonal effects on a set of informations. The technique entails, ab initio taking the seasonality from the informations to smooth those informations, so seting the seasonality back to find the prognosis. Equation 9 and 10 serves as mathematical representations for this type of theoretical account.

( 9 )


( 10 )


Determining the truth of demand prognosiss

Montgomery and Johnson ( 1976:155 ) set up that no prediction system will bring forth a perfect prognosis of future observations. There will ever be some difference between the prognosis for a future clip period and the existent realisation for that period. Thus it is necessary to cipher the truth of the demand prognosis in order to better the technique and therefore the consequences.

Adendorf and De Wit discuss three standards by which to mensurate the truth of the prediction theoretical account, being the computation of, the average absolute divergence, the standard divergence or of the average absolute per centum mistake. Each standard is described and accompanied by the relevant equation.The average absolute divergence gives an indicant of the extent of the difference between prognosis and existent demand. Equation 6 serves as a mathematical representation for this standard.

where = the difference between the existent demand and the prognosis

n = the figure of mistake footings

When the value of the standard divergence is little comparative to the demand measures, it indicates that the prognosis is reasonably accurate.

Equation 7 serves as a mathematical representation for this standard.“ The average absolute per cent mistake ( MAPE ) determines the direct relationship between the difference and the existent demand during a chosen period, expresses it as a per centum and so determines the mean for all the information points ” ( Adendorff et al. 2003:106 ) . This standard can be used to compare different calculating techniques. Equation 8 serves as a mathematical representation for this standard.

( 8 )

Choosing the best prediction theoretical account

It is of import to take a prediction theoretical account which is accurate but besides simple and easy to understand and utilize.

The truth can be estimated by agencies of equation 6, 7 and 8 and harmonizing to Murdick et Al. ( 1990:74 ) the choice of the prediction theoretical account depends on four basic factors including, clip demands, resource demands, input features available or required and end product features required. The factors should be decided upon and the most applicable method chosen.

2.5.2 BREAK-EVEN Analysis Introduction

Harmonizing to Whiteley ( 2004:33 ) break-even analysis is a technique for detecting what volume of gross revenues must be achieved for the concern to run into al its costs before doing a net income. Purpose and usage of break-even analysis

This technique can be applied to the concern as a whole, or to divisions or sections. At OP it will be applied to divisions, aka the assorted research labs.

It will besides non be applied in the mode of ciphering what volume of gross revenues must be achieved but instead seeing what they must bear down for their services in merely to interrupt even before doing a net income. This information can be integrated with the chosen method for monetary value scene schemes. Methods, tools and techniques

When making a interruption even analysis costs need to be classified as either fixed or variable costs.Fixed costs- Costss which the concern will incur irrespective of the volume of gross revenues ( or activity degree ) .

Examples include administrative wages, edifices, insurance disbursals, depreciation and operating expenses.( In OP ‘s instance, the costs that the research lab will incur, irrespective if the trials are performed or non )Variable costs- Costss which are straight related to the points sold ( or activity degree ) . Examples include direct labour costs, direct stuffs, fuel costs and selling costs.( In OP ‘s instance, the costs incurred when trials are performed )The entire costs are defined as the sum sum of the entire fixed costs and entire variable costs ( Adendorff et al. 2003:112 )Harmonizing to Adendorff and De Wit ( 2003:111 ) the break-even point can be determined by two methods, viz. the numerical or the graphical method.

Graphic method

Graphic word picture of break-even point is provided in Figure aˆ¦..

breakevenFigure aˆ¦ . Graphic word picture of break-even point ( copyright A© Blank and Tarquin 2008 ) .This chart represents merely one point being sold over a period of clip.

( In OP ‘s instance this would demo the acting of a specific trial over a period of clip ) .An overall break-even chart should be constructed, all the single charts should be aggregated. This type of chart will demo which merchandises are profitable, and which are non. ( In OP ‘s instance you ‘ll be able to see which trial is doing the labs money, and which trials are merely bing money )

Numeric method

Mathematically, the expression for break-even point can be shown as:TR = TCOrNet income = 0Net income = 0where ;TR represents the entire grosss and TC represents entire costs or disbursals for an operation.

TR = TCExpected unit gross revenues ( Q ) x Unit monetary value ( P ) = Fixed cost ( FC ) + Entire variable cost ( VC )Q x P = FC +Variable unit cost ( V ) x Expected unit gross revenues ( Q )QxP = FC + ( VxQ )( QxP ) – ( VxQ ) = FCQ ( P-V ) = FCQ = FC / ( P-V )Here, Q ( expected unit gross revenues ) is break-even point in gross revenues. As seen from the above preparation, break-even analysis depends on fixed costs, variable costs, unit monetary value of a


“ Operational Research is concerned with finding of the optimal class of action in a determination job, under the limitation of limited resources. ” Soek die Source tussen dice boeke? ?

2.6.1 LINEAR Scheduling


1 Introduction

“ Linear scheduling is a mathematical process for optimising constrained jobs with the aim of maximising net income of minimising cost. ” ( Adendorff and De Witt 2003:82 )


1.2 Purpose and usage of additive scheduling

Murdick et Al. ( 1990:492 ) explains that additive scheduling theoretical accounts are widely used mathematical techniques designed to assist operations directors in planning and determination devising. This technique is used in this undertaking to invent an optimum pricing theoretical account, to help FVS-OP in its monetary value scene scheme.


1.3 Methods, tools and techniques

All additive scheduling theoretical accounts are developed based on four chief features which are described by Adendorff and De Wit ( 2003:82 ) as:The nonsubjective map ( Z ) : The nonsubjective map is a additive relationship with a individual aim. It is a mathematical look in footings of the determination variables relevant to the peculiar job.The determination variables ( ) : These are the constituents about which a determination must be made to optimise the nonsubjective map.Coefficients ( ) : These are the parametric quantities that determine the measures in which the determination variables in the restraints and the nonsubjective map must be combined.Constraints: The restraints are equations or inequalities that topographic point limitations on the combination in which determination variables can happen in the concluding solution of the job.Linear plans are largely applied to minimisation and maximization jobs.

With respects to this undertaking, it will be used as a maximization job in order to place the optimum pricing scheme for FVS-OP. The additive scheduling theoretical account can be solved by agencies of a graphical solution or by a computing machine solution. Sing the sum of informations applicable to this peculiar undertaking and the complexness of the job, the computing machine solution seems to be the best option.

Assorted computing machine solution tools are available of which the Lingo scheduling tool and Microsoft Excel are most normally used and readily available to use to this undertaking.

2.6.2 PRICE Setting Scheme: ( Pricing )


2.1 Introduction

Pricing of goods or services for sale is a cardinal direction determination. As mentioned before FVS-OP ‘s aim is non clear in footings of desiring to do a net income or desiring to interrupt even.

“ The aim of pricing is to find the monetary value that maximizes a company ‘s net income ” ( Blom 2007:14 ) . It the instance of this undertaking the aim can besides be to interrupt even.


2 Purpose and usage of pricing scheme

The chief end of this pricing scheme is to reply the inquiry of how to find the optimum monetary value for the three different service scene, in order to do a net income or to cover all costs and interrupt even. Methods, tools and techniques

Blom ( 2007:14 ) identifies two maps that influence a company ‘s monetary value, the cost map and the monetary value response map. Multiplying monetary value with gross revenues consequences in the company ‘s net income and that gross minus the cost gives net income.A traditional pricing scheme is Cost-plus-pricing.

This method consists of puting the monetary value at your merchandise cost, including the merchandise cost plus fixed costs plus a net income border. This method requires accurate cost accounting and a specified markup value to utilize as the net income border. Although this is a reasonably accurate technique there proves to be some room for betterment.The purpose is to develop a monetary value puting scheme for FVS-OP which consequences in the best policy in order for the Faculty to either interrupt even or to be profitable. This nonsubjective exhibits features of an optimisation job, which can be presented by a additive scheduling theoretical account, accompanied by a sensitiveness analysis attack, to analyze the consequence when different pricing schemes are applied.In a survey done by Bitran and Caldentey ( 2002:11 ) , a pricing theoretical account have been generated for gross direction, which can be adjusted to pattern as a deterministic or stochastic dynamic plan to work out jobs such as the 1 at the FVS-OP.The thought is to set this proposed theoretical account in order to make a sensitiveness analysis to come up with the optimum scheme for the three different service scenes at FVS-OP.Given the maps identified by Blom, and the pricing job identified, a additive scheduling theoretical account surfaces as the most applicable technique to work out FVS-OP ‘s job sing their monetary value puting scheme.





It is of import to develop an overview of the current state of affairs sing the major income generated by the assorted research labs at FVS-OP, to be able to get down with a cost analysis. After analysing the fiscal province of the Faculty it will be possible to do recommendations on possible extra incomes such as subordinate from the University of Pretoria, the authorities etc.

Figure nkjgbkjh represents a sum-up of this overview.Grants from the National Research Fund ( NRF )Persons making researchOnderstepoort Veterinary Academic Hospital ( OVAH )

Labs of the section of Veterinary Tropical Diseases

Private Veterinary patterns from the Veterinary industryStudents making researchDomestic fowl industryPersons / representatives of assorted industriesContributions from private companies and personsCourses presented by FVS-OP to external clientsFigureaˆ¦.. Representation of the income generated by the research labs of DVTD



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