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

Explain the term- interest cover, Explain the term- Interest cover Int...

Explain the term- Interest cover Interest cover =Profit before interest and tax (PBIT)/ Interest payable(no. of times) Interest cover represents the safety of earnings tha

State the importance of gearing in accounting, state the importance of gear...

state the importance of gearing in accounting Gearing is one of the most extensively used terms in accounting. Gearing is the relationship between debt and equitywhich means th

Classification of the cost, 1) Future cost and historical cost: financial ...

1) Future cost and historical cost: financial decision is based on the future cost and not on the historical cost. The decision related to the future and hence the cost are likely

Securitization, Securitization refers to conversion of illiquid asset...

Securitization refers to conversion of illiquid assets to liquid assets by converting longer duration cash flows into shorter duration ones. Securitization denote

Discounted cash flow, Discounted Cash Flow A technique used to present...

Discounted Cash Flow A technique used to present a forecasted stream of future cash flows in conditions of its present value, or its value in today's dollars. Discounted cash

Dividend yield plus growth in dividend method, Dividend yield plus growth i...

Dividend yield plus growth in dividend method When the dividends of the firm are predictable to grow at a constant rate and the dividend payout ratio is constant, this techniq

Explain term lenders, Lenders Lenders are concerned to receive payment ...

Lenders Lenders are concerned to receive payment of interest and ultimate re-payment of capital. They don't share in the upside of very successful organisational strategies as

Explain net present value method, Q. Explain Net Present Value Method? ...

Q. Explain Net Present Value Method? Net Present Value (NPV) Method: - This process measures the Present value of returns per rupee invested. In this method present value of

Defien contractual savings institutions, Contractual savings institutions ...

Contractual savings institutions Contractual savings institutions obtain funds at periodic intervals on a contractual basis. The industry is classified into two main groups ins

What are the financial management problems, What are the financial manageme...

What are the financial management problems Traditional approach was challenged was that the treatment was built too closely around episodic events, like incorporation, promotio

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