ACCOUNTING

Accounting and management assignment

Accounting and management assignment

Q1)

Calculation of breakeven point

Fixed cost = salary + rent + maintenance

Fixed expenses = £11000+ 4000 +1000

= 16000

Variable cost = £6000

General expense per guest = (food + electricity + domestic + minibus)

£ (25+3+5+10)

= £38

General expense per 15 guest = 38*15*30 = £17100

Total revenue = 15*100*30

= £45000

Total revenue per unit = 45000/15 = 3000

Breakeven point per unit calculation

3000Q = 400Q + 33100

3000-400 = 33100

2600Q = 33100

Q= 33100/2600

Breakeven point per guest = 12.7 or 13 guest

Comment

Based on the above calculation, the holiday resort would be profitable by allocating 13 guest per week

Q1b) Graphical representation of breakeven point

Q1c) Basics of cost volume profit analysis

The Cost Volume Profit Analysis (CVP) of any organization demonstrates the process through which the probable change in cost and volume of company's products affects the profitability of the company (Dietrich et al, 2013, pp. 1-9). A Cost volume profit analysis of the company primarily comprises of five essential mechanisms that consist of (volume or level of activity, selling price of the unit, variable cost of particular unit, overall fixed cost of the product, and overall sales mix.

On the other hand, the cost volume profit analysis consists of the company also comprises of other elements including income statement of the company, analysis of the company break even, safety margin of the product, speculated or targeted net income, unexpected changed in company atmosphere, and cost volume profit analysis income statement of the company. Other than five basic elements of the CVP, these elements of the CVP are also extremely important to determine the success factor of the company.

Meanwhile, the five fundamental mechanisms are interconnect to one another, and are formulated after in-depth analysis (De Kok et al, 2008, pp. 521-531). The total quantity or activity level of the product describes the cost and revenue included in the overall activity that might vary in different organizations. In addition to this, variable cost of product per unit is calculated by dividing the total cost of the products. Meanwhile, total fixed cost of the product will remain same, in spite of lows and high in the level of activity. Finally, the last and most important component of the CVP analysis is sales mix, which described the mixture of entire products that are sold during the cost volume profit analysis (CVP).

On the other hand, other element of CVP also plays an important role in determining the success of the organization. For instance, CVP income statement of the organization enable the company to analyze the overall cost and expenses occurred during the analyzing period, and it explains the value of contribution margin in the profit of the company(Kusik & Vargas, 2009, pp.200-205). Another important analysis is (Breakeven) that enable organization to identify a spot or position at which company's total revenue will equal company's total cost. Breakeven point of a particular product or numerous products can be calculated using the popular equation method, and by using the contribution margin ...