Evaluate the revenue and cost, Financial Management

Assignment Help:

a) TFC = $1,840 (Rent, Salaries, Admin + Power)

(b) BEQ = $1,840 / $16 = 115 child places

(c) Graph: Title; Axis labels; TR line; TC line and TFC line accurately drawn and labeled

(d) Graph: Breakeven point shown and Breakeven level of output shown

(e) Demand = 20 children per day * 22 days = 440
Safety margin = 440 - 115 = 325 child places (or a very safe 282%)
The safety margin must be clearly shown on the graph for maximum marks

(f) Strengths (application needed):

• It is easy to understand and quick to construct, especially for one product businesses such as Lisa Chan's Day-Care Centre.

• As a management decision making device, it can be used to study the impact of changes in the selling price, fixed costs or/and variable costs.

• It can be useful when a business desires to seek external finance, perhaps for expansion reasons, especially if it has a high MOS.

Weaknesses (application needed):

• Fixed costs do not necessarily remain steady, e.g. salaries and rent may increase

• Average variable costs are improbable to be constant due to economies of scale

• Prices are likely to be lowered (i.e. not remain constant) to attract greater demand

• Break-even analysis is a static model so the results are of limited use

• Revenue and Cost figures are based on estimates which may not prove to be accurate

 


Related Discussions:- Evaluate the revenue and cost

Why is capital budgeting analysis so important to the firm, Why is capital ...

Why is capital budgeting analysis so important to the firm? The major goal of the financial manager is to maximize shareholder wealth. Capital investments along with positive N

Explain cross hedging, Explain cross-hedging and discuss the factors determ...

Explain cross-hedging and discuss the factors determining its effectiveness. Answer: Cross-hedging includes hedging a position in one asset by taking a position in another asse

Profit maximization-objectives of a business entity, Profit maximization ...

Profit maximization Traditionally, this was considered to be the major goal of the firm. Profit maximization refers to attaining the maximum possible profits throughout the yea

Generally accepted accpunting principle or gaap, Generally Accepted Accpunt...

Generally Accepted Accpunting Principle or GAAP The American Institute of Certified Public Accountant (AICPA) elaborates financial accounting theory and commonly accepted acco

Define stress testing and leverage, Lehman Brothers Holdings was a global f...

Lehman Brothers Holdings was a global financial services firm which, until declaring bankruptcy in 2008, participated in business in investment banking, equity and fixedincome sale

Equity instruments, QUASI-INSTRUMENTS These instruments are considered ...

QUASI-INSTRUMENTS These instruments are considered as debt instruments for a time-frame and are converted into equity at the option of the investor (or at company's option) aft

Which banking regulators use in supervising banks, Question 1: In the f...

Question 1: In the financial system, the capital markets consist of the Bond and the Equities Market. Develop this statement. Question 2: (a) Discuss why banking regula

Registered and unregistered bonds, On the basis of transferability, d...

On the basis of transferability, debentures can be classified as registered and unregistered debentures. Unregistered debentures (or bearer debentures) are freely

Explain the checklists -documenting the accounting system, Checklists or qu...

Checklists or questionnaires Audit firm will have a standard list of control questions. Audit staff can quickly ascertain which if any, are in operation by the client. There

#title Find the NPV of 2 Projects, Woody Construction is considering a new ...

Woody Construction is considering a new 3 year expansion project that requires an initial fixed asset investment

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd