Reference no: EM131334345

Question 1:

Jian, Rarimbal and Dan are considering setting up a company providing 2 hour hot air balloon trips for groups of 10 tourists at a time. The trips will include some food and drink for the tourists.

They have done some market analysis and believe it is feasible to charge a price of $1,000 for each group of 10 tourists.

Further, they have gathered some data on the likely costs of the business as below:

Variable costs
Fuel	$ 150
Wages of pilot	$ 500
Food & drink	$ 100

 

Fixed costs per month
Rental of balloon	$ 5000
Insurance	$ 1100
Transport & storage	$ 500
Maintenance	$ 800

REQUIRED:

1. Calculate:

a) The number of balloon rides required each month to break even.

b) The sales revenue required each month to break even.

c) The number of balloon rides required to make a profit of $10,000 each month.

Question 2:

Now assume that the company will be subject to an effective tax rate of 20%. In addition, assume that the business decides to pay salespeople a 5% commission fee on every trip (for groups of 10) sold and also pay an advertising agency $2000 per month to advertise the business. Calculate the number of balloon rides and the sales revenue required to make an after tax profit of $10,000.

Timber Garden Sheds Pty Ltd incurred the following costs for job number SH400, which consisted of 500 flat pack sheds for sale to a hardware store.

Direct material:

1 December Requisition no. 520: 900 metres of timber @ 8.50 per metre

16 December Requisition no. 101: 600 metres of metal panels @ $4.40 per metre

Direct labour:

16 December Timesheet no 72: 500 hours@$24 per hour

Manufacturing overhead:

Applied on the basis of direct labour hours @$12 per hour

Additional information:

Job SH400 was completed on 16 December.

REQUIRED:

Prepare a job cost sheet including dates & requisition / timesheet numbers and record the information given above and also a cost summary for job SH400.