Break-even Analysis and Managerial Decision Making

The assignment provides a detailed exploration of financial concepts starting with the calculation of break-even points for two product models, Model-X and Model-Y. It uses given financial data like fixed costs, selling prices, and variable costs per unit to compute how many units need to be sold to cover total costs. This section emphasizes understanding cost-volume-profit relationships crucial in strategic planning. Furthermore, it shifts focus towards managerial decision-making processes, emphasizing the importance of evaluating both qualitative and quantitative factors when choosing among various business strategies. Managers are encouraged to be thorough in research and analysis of internal and external factors impacting their decisions. The assignment underscores that effective decision-making is vital for enhancing company performance and profitability. References include works by Brealey et al., Correia, Davies and Crawford, Firer, Hák et al., and others, offering a comprehensive insight into financial management and strategic evaluation in business contexts.

Running Head: Accounting skills
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Project Report: Accounting skills

Accounting skills
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Contents
Que 1.................................................................................................................................3
Accounting....................................................................................................................3
Advantages and disadvantages of accounting..............................................................3
Que 2.................................................................................................................................3
a) Profit and loss a/c.....................................................................................................3
b) Calculation of owner's capital..................................................................................4
Balance sheet................................................................................................................4
Que 3.................................................................................................................................5
a) Calculation of break even analysis...........................................................................5
B) Calculation of sales unit on the basis of desired profit............................................5
C) Calculation of sales unit...........................................................................................6
d) Calculation of break even analysis...........................................................................7
Que 4.................................................................................................................................7
Cash budget..................................................................................................................7
Que 5.................................................................................................................................9
Managerial decision making.........................................................................................9
References.......................................................................................................................10

Accounting skills
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Que 1)
Accounting:
Accounting is a methodical process of identifying the financial information than
recording it into the books of the company further measuring the financial information and
classifying it into the various categories, more, verifying it, summarizing it, interpreting the
information and communicating the financial information with the user of the reports. These
reports reveal the performance, position and profitability state of the company. Further, it
explains about the financial strength and various other positions of the company (Hák et al,
2012).
This accounting process helps the company to manage the financial and accounting
data of the company so that the performance and the position of the company could be
evaluated and controls could be implemented over the financial stability of the company.
Advantages and disadvantages of accounting:
Further, the advantages and disadvantages of the accounting have been analyzed. The
main advantages of the accounting are its quick decision process. This process reveals the
financial information to the business. It helps the investors to make a better decision about the
investment into the business (Lee, 2006).
Additionally, the disadvantages of this accounting system are its high cost which is
especially for the long business. There are also timing issues in the accounting system as the
different accounting methods take the concern of the various timing. It is also riskier for the
business to choose the best accounting methods.
Que 2)
a) Profit and loss a/c
In the books of Yankee Hotel foxtrot
Income
Service revenue 14390
14390

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Expenses
Rent 2740
Depreciation 665
Supplies expenses 580
Salaries and wages expenses 7145
Interest expenses 45
11175
Net profit 3215
b) Calculation of owner's capital
Owner's capital (opening) 10640
Less: Drawings -800
Add: Profit 3215
Total Equity 13055
Balance sheet
In the books of Yankee Hotel foxtrot
As on July 31, 2014
Assets
Cash 7680
Supplies 1160
Prepaid rent 1965
Accounts receivable 810
Total current assets 11615
Equipment 11400
Equipment- accum dep -840
Total fixed assets 10560
Total assets 22175
Liability
Notes payable 6000

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Salaries and wages payable 360
Interest payable 40
Unearned service revenue 580
Accounts payable 2140
Total liability 9120
Net assets (total assets- total liab) 13055
Equity 13055
(Hines, 2011)
Que 3)
a) Calculation of break even analysis
Total
Sales 90
Less: Variable
cost 63
Contribution
$
27.00
Fixed cost
$
10,80,000.00
Break even
(Fixed cost /
contribution per
unit) 40000 Units
B) Calculation of sales unit on the basis of desired
profit
Per unit
Selling price
$
90
Less:
Variable cost
$
63

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Contribution
(Sales - variable
cost)
$
27
Fixed cost
$
10,80,000.00
BEP 40000 Units
Desired Profit
$
60,000.00
Sales units to
achieve the
desired profit
(Desired profit /
contribution +
sales units)
£
42,222.22 Units
C) Calculation of sales unit
Per unit 45000 units
Selling price
$
90
$
40,50,000
Less:
Variable cost
$
63
$
28,35,000
Contribution
(Sales - variable
cost)
$
27
$
12,15,000
Fixed cost
$
11,88,000.00
$
11,88,000
Break even
(Fixed cost /
contribution per
unit) 44000 Units
Profit
$
27,000

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Sales units to
achieve the
desired profit
(Desired profit /
contribution +
sales units)
£
45,000.00 Units
d) Calculation of break even analysis
Total
Sales 108
Less: Variable
cost 69.3
Contribution
$
38.70
Fixed cost
$
12,90,000.00
Break even
(Fixed cost /
contribution per
unit) 33333.33 Units
Que 4)
Rodie Company
Cash budget
For the year 2017
July August
Cash Balance
$
50,000
$
50,000
Add: Cash receipts
$
3,94,000
$
3,18,000
Total cash available for use
$
4,44,000
$
3,68,000
Less: cash disbursements

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Purchase
$
2,75,000
$
2,17,500
Selling and administrative
expenses
$
48,000
$
48,000
Dividends
$
1,03,000
Equipment purchase
$
30,000
Interest paid
$
213
Total disbursements
$
4,26,000
$
2,95,713
Cash surplus
$
18,000
$
72,287
Add: Bank Loan
$
32,000
Less: Loan payment
$
22,287
budgeted ending cash balance
$
50,000
$
50,000
(CORREIA, 2013)
Assumption:
It is assumed that the bank loan would be taken into the same month in which the lack
has taken place and the interest would be paid in each month.
working Note:
cash Schedule of purchase
For the year 2017
June July August
Material Purchase
$
3,00,000
$
2,50,000
$
1,05,000
Cash received 50%
$
1,50,000
$
1,25,000
Cash received 50%
$
1,25,000
$
52,500
Total cash Paid
$
2,75,000
$
1,77,500
cash Schedule of sales

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For the year 2017
June July August
Credit Sales
$
1,35,000
$
1,45,000
$
90,000
Cash received 60%
$
81,000
$
87,000
Cash received 40%
$
58,000
$
36,000
Total amount from credit
sales
$
1,39,000
$
1,23,000
Add: Cash sales
$
2,55,000
$
1,95,000
Total cash received
$
3,94,000
$
3,18,000
Que 5)
Managerial decision making:
The given statement depict about the various business decision making steps. It depict
that it is not an easy task for the managers to identify and evaluate the best strategy for the
business. This statement depict that the process of decision making starts from the
identification of various decision alternatives. Further, the qualitative and quantities research
is done over all the alternatives to identify the best one. Qualitative issues of each alternatives
are identified through this process to analyze the further issues and the problems which could
be arisen through the alternative decisions (Brealey, Myers and Marcus, 2007).
More, the findings are analyzed to evaluate the best of the alternatives. For analyzing
the best result, qualitative and quantities factors are also analyzed and the best alternative has
been chose. This process depict that a manager is required to be extra attentive at every step
of the decision making process to make the performance and position of the company more
profitable. Further, it depict that the managers are required to have knowledge about the
research and they must also aware about the internal and external position of the business so
that an effective result could be got (Davies and Crawford, 2011).
A manager must look over the various position and the factors of each decision
alternative and must evaluate all the alternatives on the basis of the standards so that it

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becomes easy for them to evaluate the position of the company. Thus it has been analyzed
that it is an important and crucial process for the managers as well as the business to evaluate
the alternatives and make a better decision for the betterment of the business.