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

Cross-sector analysis, Cross-Sector Analysis: The growth of a country d...

Cross-Sector Analysis: The growth of a country depends upon how fast a country can adapt to deregulation and internationalization. Deregulation and internationalization put com

Baumol sales max theory, critically appraise baumol max. theory as an alter...

critically appraise baumol max. theory as an alternative objective of the firm

Treasury strips, A treasury strip can be sold in two parts based on i...

A treasury strip can be sold in two parts based on its components. When the investor is empowered with a right to receive the coupon payments on sale of its treas

Price of the share as per gordon''s model, Considering the following inform...

Considering the following information, what is the price of the share as per Gordon's Model?  Details of the Company

Explain about routine functions, Q. Explain about Routine Functions? Ro...

Q. Explain about Routine Functions? Routine Functions: - The routine functions are Supervision of cash receipts and payments. Opening Bank Accounts as well as managing them Saf

State about the internal benchmarking, State about the Internal Benchmarkin...

State about the Internal Benchmarking Compare an internal function to 'the best internally' within same organisation for example different methods of cleaning used by hospit

Distinguish between lease and hire purchase, Distinguish between Lease and ...

Distinguish between Lease and Hire Purchase. What are the circumstances in which each of the system of financing is better than other?

What is purchasing power risk, Q. What is Purchasing Power Risk? Variat...

Q. What is Purchasing Power Risk? Variations in the returns are caused also by the loss of purchasing power of currency. Inflation is the reason behind the loss of purchasing p

Mathematical property of median, Mathematical Property The sum of the d...

Mathematical Property The sum of the deviations of the items from median, ignoring signs, is the least. For example, the median of 6, 10, 14, 18 and 22 is 14. The deviations fr

What are the limitations of ratio analysis, What are the Limitations of rat...

What are the Limitations of ratio analysis A ratio on its own is meaningless. Accounting ratios should always be interpreted in relation to other information, for illustration:

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