logo

Accounting Fundamentals: Break-even Analysis, Management Accounting Relevance, and Techniques

8 Pages1995 Words35 Views
   

Added on  2023-01-06

About This Document

This document provides an overview of accounting fundamentals, including break-even analysis, the relevance of management accounting, and techniques used in planning, controlling, and decision making. It covers topics such as the breakeven point, profit analysis, limitations of break-even analysis, and the importance of management accounting in business operations. The document also discusses various techniques used by management accountants, such as budgetary control, ratio analysis, and marginal costing.

Accounting Fundamentals: Break-even Analysis, Management Accounting Relevance, and Techniques

   Added on 2023-01-06

ShareRelated Documents
LCBB4001 ACCOUNTING
FUNDAMENTALS
Accounting Fundamentals: Break-even Analysis, Management Accounting Relevance, and Techniques_1
TABLE OF CONTENTS
QUESTION 1.............................................................................................................................3
(a) Breakeven point................................................................................................................3
(b) Profit made on sale...........................................................................................................3
(c) Analysing the new strategy of Solent Ltd by making advertisement expenses of £12,500
................................................................................................................................................4
(d) Limitations of break-even analysis...................................................................................4
QUESTION 2.............................................................................................................................6
(a) Critical analysis of the relevance of management accounting..........................................6
(b) Techniques which is used by the management accountant for objective of planning,
controlling and the decision making......................................................................................7
REFERENCES...........................................................................................................................8
Accounting Fundamentals: Break-even Analysis, Management Accounting Relevance, and Techniques_2
QUESTION 1
(a) Breakeven point
Units = Fixed Cost / Contribution per unit
Fixed Cost (£) = 180000
Contribution per unite = Sales – Variable Cost per unit
Selling price per unit (£) = 5.75
Variable Cost Per Unit (£) = Direct material + Direct Labour + Other Direct Cost
1.75 + 1.35 + .40
3.5
Contribution Per Unit (£) = 5.75 – 3.5
2.25
Break even point in unit = £ 180000 / 2.25
80000 Units.
Breakeven Point in Amount (£) = Breakeven point in unit * Selling price per unit
= 80000 * £5.75
= £460000
Interpretation: Therefore, the break even point of the sandals of the Solent ltd is 80000 in
terms of units and £460000 in respect to the amount or revenue. This is the point at which the
company will be at no profit and no loss situation.
(b) Profit made on sale
Sales (£) = 517500 (90000 * 5.75)
Variable Cost (£) = 315000 (90000 * 3.5 {1.75 + 1.35 + .40})
Fixed Cost (£) = 180000
Profit (£) = Sales – Variable Cost – Fixed Cost
= 517500 – 315000 – 180000
Accounting Fundamentals: Break-even Analysis, Management Accounting Relevance, and Techniques_3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Accounting Fundamentals
|7
|1040
|73

Breakeven Analysis and Management Accounting
|7
|1098
|77

Importance of Management Accounting in Businesses
|17
|6073
|52

Importance of Management Accounting
|18
|5567
|51

Accounting Fundamentals: Break-Even Analysis and Management Accounting
|8
|1208
|108

Importance of Management Accounting and Differences from Financial Accounting
|10
|1944
|51