Accounting and Finance: Breakeven Analysis and Investment Appraisal Techniques

Accounting and finance

INTRODUCTION...........................................................................................................................4
PART A...........................................................................................................................................4
PART B...........................................................................................................................................5
A. Calculation of contribution per unit........................................................................................5
B. Evaluation of breakeven analysis and the margin of safety....................................................6
C. calculation of profits if the company produces and sells more number of units at same
selling price per unit....................................................................................................................6
D Computation of the net profits after increasing the sales units and per unit price...................6
E Identifying and explaining the assumptions of the breakeven analysis model and its
usefulness.....................................................................................................................................7
PART C...........................................................................................................................................8
b. Analyzing the benefits and the limitations of the different capital or investment appraisal
technique....................................................................................................................................10
c. Explaining and evaluating the advantages and disadvantages of various planning tools......12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Accounting and finance means the amount of money and the credit invested in the
business. It includes the procurement, allocation and utilization of the funds for smooth
functioning of the operations of the organization. The present report is based on the different
aspects of the accounting concepts and the business finance. The study provides the deep insights
on the breakeven analysis and various investment appraisal techniques with their pros and cons.
Furthermore it describes the benefits and the limitations of different budgets. Several practical
implications are also included in the study.
PART A
Dexter Plc
Income statement for the year ended 31st December
2018
Particulars Amount Net figures
sales revenue 504000+129000 633000

less: cost of sales 243000+54000 297000
gross profit 633000-297000 336000
less: operating expense-
rent 112500
depreciation on motor
van 57600
wages 117000
electricity bill 5700
van running expenses 33600
bad debts 1500 327900
Operating profit before tax 8100
less: tax 4500-2400*3/12 525
Net profit 7575
PART B
A. Calculation of contribution per unit
Particulars
Figures
(in £)
Fixed cost
Production 59,000
Selling etc. 47600
Total fixed cost 106,600
Variable cost per unit
Materials 5.25
Labor 2.95
Variable overheads 1.85
Total variable cost per unit 10.05
Particulars
Figures
(in £)
Selling price per unit 13
Less: Total variable cost per unit 10.05
Contribution (per unit) 2.95