Managing Finance and Cost in Business: A Case Study

CASE STUDY

TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
Calculation of break- even point and margin of safety...............................................................3
Income using absorption and marginal costing...........................................................................4
PART B............................................................................................................................................6
Understanding of different types of cost and there relevance in pricing decision......................6
Calculation of all variance..........................................................................................................7
Preparation of budget to control operation..................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Managing the finance is the most important thing for the company and its success. This is
majorly because of the fact that if the money will be manages and allocated in proper manner
then this will increase the profitability of the company to a great extent (Klopotan, Zoroja and
Meško, 2018). Hence, the present report will start by calculating the BEP in order to know the
profitability of the company. Further, the income on basis of both marginal and absorption
costing will be calculated. Also in next part the different types of cost and their relevance over
the pricing decision will be highlighted. Further the different types of variance will be calculated
and after that budget for operational control will be made.
PART A
Calculation of break- even point and margin of safety
The break- even point is referred to as the point wherein the total cost or the expenses and the
total sales are equal. This point can also be referred to as the point wherein the company faces a
no profit no loss situation. This is a simplest form through which the company can facilitate the
fact that revenue from a product has the ability to cover all the cost of producing the goods and
services. The margin of safety is the difference between the actual or the budgeted sales with the
level of breakeven sales.
Particulars Formula Figures (in £)
Selling price per unit 24
Variable cost per unit 18
contribution per unit
Selling price per unit - variable cost
per unit 6
Budgeted fixed cost 800000
BEP (in units) Fixed cost / contribution per unit 133333
BEP (in £) BEP units * SPU 3200000
Actual sales 3360000
BEP sales 3200000
Margin of safety Actual sales - BEP sales 160000
BEP as a % of Budgeted sales 3200000/3360000*100 95%