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

Day traders, Day Traders Day traders are basically the market markers. ...

Day Traders Day traders are basically the market markers. They create liquidity in the market by frequently buying and selling stocks throughout the day in the hope that the pr

Yield spread measures for floating-rate securities, In a floating rat...

In a floating rate security, the coupon rate changes periodically as per the reference rate. The yield to maturity of floating rate securities cannot be calculated as

Calculate the interest value , 1. Suppose a firm's tax rate is 35%. What af...

1. Suppose a firm's tax rate is 35%. What affect would a $10 million operating expense have on this year's earnings?  What effect would it have on next year's earnings? 2. What

Calculate the waac, Question 1: You hold a diversified portfolio consi...

Question 1: You hold a diversified portfolio consisting of a Rs.5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided t

Trade credit is free credit agree or disagree, Trade credit is free credit....

Trade credit is free credit.  Do you agree or disagree with this statement?  Explain. Trade credit isn't free.  It has a value.  Who bears that cost depends on the conditions o

Treasury coupon securities and bills, Many practitioners feel that in...

Many practitioners feel that instead of using only on-the-run issues, all treasury coupon securities and bills are to be used for constructing the theoretical spo

Briefly define liquidity risk faced by a bank, Question: You have just ...

Question: You have just been appointed the secretary of the ALM Committee (ALCO) of ABN Bank. The ALCO members have some queries relating to the liquidity risk faced by the ban

Define the process of wealth maximisation, Define the process of Wealth Max...

Define the process of Wealth Maximisation Shareholders' wealth can be defined as total market value of all the equity shares of company. So when we talk about maximising wealth

Explain the term - financial analysis, Financial analysis The purpose o...

Financial analysis The purpose of financial statements is to provide information to all the users of these accounts to assist them in their decision-making. It has to be concer

Leverage, evaluate the importace of leverage in financial management of a s...

evaluate the importace of leverage in financial management of a small scale company

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