Accounting Analysis of Grenville Ltd

Accounting Analysis of Grenville Ltd

Introduction

Accounting is a field of study that involves collecting and summing the given set of information and facilitates managers to make significant decisions. This information can be utilized by accountants, regulators, investors, lenders, creditors, and general public widely along with managers. The cost accounting is a sub division of accounting field that is utilized for tracking cost and related information within the organization. This is referred to an internal accenting system. Similarly managerial accenting is another sub field of accenting that helps in measuring and determining financial drivers from business operations. It has numerous useful techniques that are used for comprehending profitability and anticipating the profitability of future based activities. These fields of accounting facilitate a manger in gathering relevant information for making significant decisions and planning for future based tasks, supporting managers for the purpose of unswerving and calculating accounting based operations, encouraging managers and employees to attain and work for achieving organizational goals and assessing the recital of managers and other employees in the organization (Conway-Schempf, n.d., pp. 1-7).

The main purpose of this assignment is to comprehend and analyze the benefits of conducting a cost volume profit analysis, apply the concept of breakeven analysis from economist and accountant's point of view and comprehend the difference between two methods, understand variety of costs and its classifications while conducting doing analysis, understand the structure of cost from company's point of view and determine the margin of safety, evaluate and assess the high low methods of cost estimation along with determining any possible weaknesses and alternatives available to replace this methodology, and determine or analyze the difference between the two given marketing proposals for the organization.

Scenario

The given company Grenville Ltd is engaged in manufacturing and selling a product iin local market that serves the purpose of saving fuel for vehicles. The company initiated its operations in January 2012. The sales of first semiannual year are found to be quiet vigorous mainly due to increase in fuel prices all over the world. The sales for the remaining year have declined due to increasing competition and slow decline in sales prices.

Assumptions

The main assumptions in assessing the given scenario are as follow:

Sales commission is 5% of sales value.

Sales staff is employed for 3 months and are given a basic salary along with commission

Data

First Half Year

Second Half Year

£000

£000

£000

£000

Sales

- 1sthalf:35,000units

1,400

- 2nd half:25,000units

1,000

Direct materials

350

250

Direct labour

280

200

Manufacturing overheads

245

195

Administration overheads

15

15

Selling overheads*

165

1,055

145

805

Net profit

345

195

Discussion

Difference between accountant's and economists' breakeven chart

The cost volume profit analysis is also referred to as the breakeven analysis. It states the changes in future based profit level as a result of changes in fixed cost, variable cost, sales price, quantity and other cost mixtures. It is commonly referred to as breakeven analysis. However, it is necessary to mention that breakeven point is a different concept to that of breakeven analysis. The breakeven point indicates the number of units to be produced or sold in order to attain a situation where profit is equal to zero ...