ACCOUNTING

Cost and Management



Cost and Management

Answer 1

LOCAL AUTHORITY

(30 operating weeks per year)

Guests

Revenue for 30 weeks

Food cost

Electricity

Domestic expenses

Mini bus

Total VC

Staff expenses

Rent + Garden expenses

R-VC-S-R-G



(B-(H+I+J))

6

18,000 4,500 540 900 1,800 7,740 11,000 5,000 (5,740)

7

21,000 5,250 630 1,050 2,100 9,030 11,000 5,000 (4,030)

8

24,000 6,000 720 1,200 2,400 10,320 11,000 5,000 (2,320)

9

27,000 6,750 810 1,350 2,700 11,610 11,000 5,000 (610)

10

30,000 7,500 900 1,500 3,000 12,900 11,000 5,000 1,100

11

33,000 8,250 990 1,650 3,300 14,190 11,200 5,000 2,610

12

36,000 9,000 1,080 1,800 3,600 15,480 11,200 5,000 4,320

13

39,000 9,750 1,170 1,950 3,900 16,770 11,200 5,000 6,030

14

42,000 10,500 1,260 2,100 4,200 18,060 11,200 5,000 7,740

15

45,000 11,250 1,350 2,250 4,500 19,350 11,200 5,000 9,450

 

 

 

 

 

 

 

 

 

 

The above table shown is the calculation of breakeven point for a local authority which operates for 30 weeks every year. There are two scenarios. I have taken the number of guests that is a minimum of six who visits the holiday resort and a maximum of 15 guests. The cost is 100 pounds per person per week. Firstly all the costs that the holiday resort incurs are listed and calculated that are food, electricity, domestic and minibus these are the total variable cost the business incurs however others are staffing, rent and gardening expenses. Similarly revenue is calculated as per number of guests, cost per person per week and the operating weeks of the business. The breakeven point is when; (revenue - variable cost - fixed cost = 0). It is used to compute the number of units that need to be produced for the revenue to be zero. So here in this scenario breakeven point is at 10 guests. Hence; the following scenarios are applied:

TR = TC

Either,

Revenue - VC - FC = 0

Break-Even Graph of the above calculation is as follows (www.google.com):

Analysis of Cost-Volume-Profit (CVP) is a managerial bookkeeping method that is concerned with the impact of volume of sales on the business's operating profit. It manages how operating profit is influenced by the fluctuations in the business's variable cost, fixed cost, selling price of the firm's product for every unit and the bargains intermingle of two or more distinctive products. CVP analysis is based upon figuring out the breakeven purpose of expense and volume of products. It could be useful for managers in making short term financial choices, and moreover for general instructive purposes (accountingexplained.com). CVP analysis has a few assumptions that are given as follows:

All the costs are either variable or fixed costs.

Sales price & variable cost per unit along with total fixed cost all are constant.

All the units produced are sold.

CVP analysis makes some assumptions keeping in mind the end goal to be important. It frequently collects that the sales, fixed and variable cost for every unit are steady that is a constant. Running this investigation includes utilizing numerous mathematical statements utilizing cost, require and different variables and plotting them out on a financial chart.

The Cost Volume Profit Analysis of an association shows how the progressions in ...