Financial Analysis and Break-Even Calculations

This assignment presents a detailed financial analysis of a hypothetical company. It includes calculations of operating profit, fixed costs, and the breakeven point. Furthermore, it examines the effects of various scenarios, such as a 10% increase in fixed costs, a 15% rise in sales price, and a combination of changes in sales price, volume, variable costs, and fixed costs. The analysis demonstrates how different factors influence profitability and break-even points.

Running head: FUNDAMENTAL OF ACCOUNTING
Fundamental of Accounting
Name of the Student:
Name of the University:
Authors Note:

FUNDAMENTAL OF ACCOUNTING
1
Table of Contents
Exercise 19.5..............................................................................................................................2
1. Moving average Method:.......................................................................................................2
2. Specific Identifications:.........................................................................................................3
3. FIFO Method:.........................................................................................................................3
Exercise 21.2..............................................................................................................................5
Exercise 22.3..............................................................................................................................6
Exercise 9.2................................................................................................................................7
A. Calculating the overhead rate applicable to each room:.......................................................7
B. Depicting the directly labour and direct expenses that are likely to be applicable to hotel
room for pricing the room rate:..................................................................................................8
Exercise 11.10............................................................................................................................8
A. Calculating the breakeven sales units and breakeven point in dollars:.................................8
B. Calculating the margin safety of the company:.....................................................................9
C. Calculating the company’s profit under different circumstances:.......................................10
1. Variable cost increase by 10%:............................................................................................10
2. Sales volume decrease by 20%:...........................................................................................10
3. Fixed cost increase by 10%:.................................................................................................11
4. Sales price increase by 15%:................................................................................................11
5. Sales price increases by 20%, sales volume decreases by 20%, variable costs increase by
20%, and fixed costs decrease by 20%....................................................................................11
Reference and Bibliography:....................................................................................................13

FUNDAMENTAL OF ACCOUNTING
2
Exercise 19.5
1. Moving average Method:
Moving Average Method
Purc
hases
Sa
les
Bal
anc
e
Dat
e
Expla
nation
Units Unit
Cost
Total
Cost
U
nit
Unit Cost Total
Cost
Uni
ts
Unit
Cost
Total
Cost
01-
Ma
y
Beg.
Invent.
80 $
7.00
$
560.00
03-
Ma
y
Purcha
ses
90 $
8.00
$
720.00
170 $
7.53
$1,280.0
0
10-
Ma
y
Purcha
ses
110 $
9.00
$
990.00
280 $
8.11
$2,270.0
0
12-
Ma
y
Sales 90 $
8.11
$729.
64
190 $
8.11
$1,540.3
6
17-
Ma
y
Sales 80 $
8.11
$648.
80
110 $
8.11
$891.56
25-
Ma
Sales 30 $
8.11
$243.
30
80 $
8.11
$648.26

FUNDAMENTAL OF ACCOUNTING
3
y
Cost of sales $1,62
1.74
Ending
Inventory
$648.
26
2. Specific Identifications:
Date Ending inventory Amount per unit Amount
31-May 13 $ 7.00 $ 91.00
03-May 24 $ 8.00 $ 192.00
10-May 43 $ 9.00 $ 387.00
80 $ 670.00
Cost of sales Amount per unit Amount
67 $ 7.00 $ 469.00
66 $ 8.00 $ 528.00
67 $ 9.00 $ 603.00
200 $ 1,600.00
3. FIFO Method:
FIFO Method
Purc
hases
Sa
les
Bal
anc

FUNDAMENTAL OF ACCOUNTING
4
e
Dat
e
Expla
nation
Units Unit
Cost
Total
Cost
U
nit
Unit Cost Total
Cost
Uni
ts
Unit
Cost
Total
Cost
01-
Ma
y
Beg.
Invent.
80 $
7.00
$
560.00
80 $
7.00
03-
Ma
y
Purcha
ses
90 $
8.00
$
720.00
90 $
8.00
$1,280.0
0
80 $
7.00
90 $
8.00
10-
Ma
y
Purcha
ses
110 $
9.00
$
990.00
110 $
9.00
$2,270.0
0
12-
Ma
y
Sales 80 $
7.00
$560.
00
80 $
8.00
12-
Ma
y
Sales 10 $
8.00
$80.0
0
110 $
9.00
$1,630.0
0
17-
Ma
y
Sales 80 $
8.00
$640.
00
110 $
9.00
$990.00

FUNDAMENTAL OF ACCOUNTING
5
25-
Ma
y
Sales 30 $
9.00
$270.
00
80 $
9.00
$720.00
Cost of sales $1,55
0.00
Ending
Inventory
$720.
00
Exercise 21.2
Recording the journal entries of machines by Amorico Pty Ltd for 2016
Date Particulars Amount Amount
02-01-16 Machinery 1 Depreciation..............………….Dr $ 8,400
Machine 1 $ 8,400
(Being disposed the Machinery 1)
02-01-16 Machinery 2 Depreciation…………………….Dr $ 15,500
Loss on Disposal………............................….Dr $ 3,400
Machine 2 $ 18,000
Cash at Bank $ 900
(Being disposed the Machinery 2 and attaining loss)
01-04-16 Machinery 3 Depreciation expenses……...….Dr $ 1,950
Machinery 3 Depreciation $ 1,950
(Being recording the depreciation for Machinery 2)

FUNDAMENTAL OF ACCOUNTING
6
01-04-16 Machinery 3 Depreciation…….............…….Dr $ 29,250
Loss on Disposal $ 10,750
Machine 3 $ 40,000
(Being disposed the Machinery 3 and attaining loss)
Exercise 22.3
Recording the journal entries of Aspire Services Ltd for the transactions during July 2018
Date Particulars Amount Amount
12-07-18 Accounts Receivable……………...........….Dr $ 4,840.00
Sales $ 4,400.00
GST Payable $ 440.00
(Being sales conducted on credit)
15-07-18 Cash………………………………………...Dr $ 1,320.00
Sales $ 1,200.00
GST Payable $ 120.00
(Being sales conducted on cash)
26-07-18 Purchases………………….....……………..Dr $ 1,600.00
GST Receivable…………….......………….Dr $ 160.00
Accounts Payable $ 1,760.00
(Being purchases conducted on credit)

FUNDAMENTAL OF ACCOUNTING
7
30-07-18 Accounts Receivable……………..........….Dr $ 5,060.00
Sales $ 4,600.00
GST Payable $ 460.00
(Being sales conducted on credit)
31-07-18 GST Payable……………………………....Dr $ 1,020.00
GST Receivables $ 160.00
Cash at Bank $ 860.00
(Being recording the GST payable)
Exercise 9.2
A. Calculating the overhead rate applicable to each room:
Particulars Amount
Depreciation $ 190,600
Gardening and pool maintenance $ 212,400
Insurance $ 220,400
Maintenance $ 246,800
Rates $ 57,200
Electricity $ 96,600
Sundry expenses $ 156,000
Indirect salaries $ 528,000
Total overhead costs $ 1,708,000

FUNDAMENTAL OF ACCOUNTING
8
Particulars Value
Rooms 150
Occupancy rate 80%
Days 365
Room nights 43,800
Particulars Value
Total overhead costs $ 1,708,000
Room nights 43,800
Overhead rate for each room $ 39.00
B. Depicting the directly labour and direct expenses that are likely to be applicable to
hotel room for pricing the room rate:
There are different expenses, which could be included under directly labour for listing
in the room rate. Such expenses include cleaning and servicing expenses that is conducted by
the employees. Furthermore, the different expense, which are included under direct expense
are laundry expenses conducted on bed liners and towels, with chocolate, flowers, fruits and
minim bars refills that are conducted by the hotel (Riasi et al. 2017).
Exercise 11.10
A. Calculating the breakeven sales units and breakeven point in dollars:
Particulars Value
Sales price $ 200

FUNDAMENTAL OF ACCOUNTING
9
Variable cost $ 160
Contribution $ 40
Contribution margin 20%
Particulars Value
Contribution $ 40
Fixed cost $ 208,000
Break even points in units 5,200
Particulars Value
Contribution margin 20%
Fixed cost $ 208,000
Break even points in Dollars $ 1,040,000
Break even points in Dollars $ 1,040,000
B. Calculating the margin safety of the company:
Particulars Units Amount
Sales 6500 $ 1,300,000
Break even points in units 5200 $ 1,040,000
Margin of safety $ 260,000