Management Accounting: Cost Calculation, Schedule Preparation, and Profit Analysis

Management Accounting

Table of Contents
QUESTION 1..................................................................................................................................2
1)..................................................................................................................................................2
a) Calculation of Variable cost per occupied bed on a daily basis using high-low method........2
b) Calculation of total fixed operating cost per month using high-low method..........................2
2) Calculation of total operating cost at 70% occupancy............................................................2
3) Computation of following cost................................................................................................3
QUESTION 2..................................................................................................................................3
QUESTION 3..................................................................................................................................6
QUESTION 6..................................................................................................................................8
a) Calculation of Total Contribution for 2017.............................................................................8
b) Calculation of Break-even points in units...............................................................................9
c) Calculation of sales unit to make desired net profit................................................................9
d) Effect on break-even point if selling price reduced by 15%.................................................10
e) Calculation of break-even point in units if variable cost get increases by £2.25..................10
f) Meaning of contribution margin ratio and its uses in business planning...............................10
REFERENCES..............................................................................................................................12
1

QUESTION 1
1)
a) Calculation of Variable cost per occupied bed on a daily basis using high-low method
Formula = (Highest value of total cost – Lowest value of total cost)/ (No. of days at the highest
level of cost – No. of days at the lowest level of cost)
= (422400 – 399300)/ (13200 – 9900)
= 23100/ 3300 = £7
Particulars Calculation Amount (£)
Highest value of total cost 550 beds* 80%* £32* 30 days 422400
Lowest value of total cost 399300
No. of days at the highest level
of cost
550* 80%* 30 13200
No. of days at the lowest level
of cost
550*60%* 30 9900
b) Calculation of total fixed operating cost per month using high-low method
Variable cost per occupied bed is £7
Total Fixed operating cost = Highest activity cost – (Variable cost per bed* Highest activity
units)
= 422400 – (7* 13200) = 330000
or
Total Fixed operating cost = Lowest activity cost – (Variable cost per bed* Lowest activity unit)
= 399300 – (7* 9900) = 330000
So, here in the given question total fixed operating cost is £330000
2) Calculation of total operating cost at 70% occupancy
Cost Model = Fixed cost + (Variable cost* unit activity)
= £330000 + £7* 550* 70%*30
= £330000 + 80850 = £410850
2

So, in this given question the total operating cost would St. James Hospital can expect is
£410850 at the occupancy rate of 70%.
3) Computation of following cost
a) Total variable cost
= £125188/ 6800* 7100 units = £130711
b) Total Fixed cost
= £164152
c) Total cost
= Fixed cost + variable cost
= £164152 + £130711 = £294863
d) Average variable cost per unit
= Variable cost/ Total unit
= £130711/ 7100 = £18.41 per unit
e) Average fixed cost per unit
= Fixed cost/ total unit
= £164152/ 7100 = £23.12 per unit
f) Average total cost per unit
= average variable cost per unit + average fixed cost per unit
= 18.41 + £23.12 = £41.53
QUESTION 2
3