Management Accounting | Assignment-1

Running Head: MANAGEMENT ACCOUNTING
1
MANAGEMENT ACCOUNTING

MANAGEMENT ACCOUNTING
Contents
Question 1..................................................................................................................... 3
Part e)........................................................................................................................ 3
Question 2..................................................................................................................... 3
Question 4..................................................................................................................... 4
Part a)........................................................................................................................ 4
Advantages................................................................................................................. 5
Disadvantages.............................................................................................................. 5
Advantages................................................................................................................. 6
Disadvantages.............................................................................................................. 6
References..................................................................................................................... 7

MANAGEMENT ACCOUNTING
Question 1
Part a)
Contribution per unit for one night's
accommodation for one guest
Total Contribution 146000 40
(Number of nights * Number of guests) 3650
Part b)
Contribution margin ratio
Contribution 146000 61.54%
Sales 237250
Part c)
Breakeven Point
Fixed costs 58000 145
Contribution per night 400
Breakeven point in dollars
Total fixed costs 58000 $ 94,250.00
Contribution ratio 61.54%
Part d)
Desired night's accommodation
Fixed costs + Target Profit 138000 345
Contribution per night 400
Part e)
Margin of safety
Current sales - Breakeven sales 68250 42.00%
Current sales 162500
Margin of safety

MANAGEMENT ACCOUNTING
The margin of safety is a point that indicates the amount of sales which is above the
breakeven point. In the present case study the margin of safety is 42% for by the Sea hotel
(Teegala & Singal, 2016).
Part f
New Breakeven point in units
Fixed costs 58000 149.48
Contribution per night 388
Question 2
Part a)
As per the current scenario the company is suffering from loss of $25000 in the Juice bar
section and this typically awakens the company. If the Juice bar continues to run for Albert
Street, in that case, the losses are bound to happen. However if proper allocation of cost is done,
the company might be able to save the department. According to the concepts of the costing, the
fixed costs cannot be avoided; hence the changes are required to be done in variable section only.
If the costs are allocated on the proper basis, the new profit that the company would receive from
juice bar section is $16590, keeping the sales and cost of goods sold intact. Below is the table
that can define the picture in the clear manner (Pearce, 2016).
Part b)
Income Statement
Particulars Existing plan
Revised
Plan
Sales
$
140,000.00
$
140,000.00
Less: cost of goods sold
$
65,000.00
$
65,000.00
Gross margin
$
75,000.00
$
75,000.00