Management Accounting: Cost Formula, Income Statement, Variance Analysis, Break-Even Point, Contribution Margin Ratio

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
QUESTION 1.................................................................................................................................................3
QUESTION 3.................................................................................................................................................4
QUESTION 4.................................................................................................................................................6
(b) Possible causes of variances...............................................................................................................8
(c) Explain how you would determine which variance to examine further in relation to a work
performance?..........................................................................................................................................8
QUESTION 6.................................................................................................................................................9
6. What is meant by a product’s contribution margin (CM) ratio? How is this ratio useful in planning
business operations?.............................................................................................................................10
REFERENCES..............................................................................................................................................11

INTRODUCTION
Management accounting, often defined as managerial accounting, is the process of giving
financial data and knowledge to executives in order to assist them in solving problems. This
activity is performed by an important core teams, but this is what distinguishes managerial
accounting from accrual analysis. Effective internal accounting exchanges analyses and
information (such as balanced sheets and payments) with corporate governance as part of this
procedure. Those documentations are used by leadership to determine knowledgeable and
methods to assess on business operations, organization, and management consulting. In this
report consist of different questions which are based on the financial activities that are recorded
by company in a financial year.
QUESTION 1
The cost formula can be worked given below:
When the occupancy rate is 80%, no beds = 550 * 80% = 440
Therefore, the number of days without occupied beds = 440 * 30 = 13200
Total operating cost for 30 days = 13200 * 32 = $422,400
When 60% is occupied, no bed = 550 * 60% = 330
Therefore, the number of days without a bed = 330 * 30 = 9900
Total operating costs for 30 days = 326700
Use high-low method
Difference in sleeping days = 80%-60% = 20% * 550 * 30 = 90 * 30 = 3300 sleeping days
Operating cost difference = 422400 - 326700 = 90,700
Therefore, the daily variable cost per bed = 95700/3300 = $29
Fixed costs = 60% of total operating costs - 60% of variable costs on the day of stay
That is FC = 326700 - 9900 * 32 = 39600