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  • Written Assignment Unit 3 Managerial Accounting

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    This document is a written assignment for a managerial accounting course. It includes calculations to analyze the business and financing requirements for a seaplane tour company over three years. In year one, the company's break-even point is calculated at 800 flights based on $36,000 in fixed costs and $45 contribution margin per flight. In year two, the break-even point rises to 868 flights as costs increase. In year three, it is calculated that 1,109 flights would be needed to earn a $10,000 profit. The conclusion is that the bank should grant the company a loan as the break-even points seem achievable.

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    This document is a written assignment for a managerial accounting course. It includes calculations to analyze the business and financing requirements for a seaplane tour company over three years. In year one, the company's break-even point is calculated at 800 flights based on $36,000 in fixed costs and $45 contribution margin per flight. In year two, the break-even point rises to 868 flights as costs increase. In year three, it is calculated that 1,109 flights would be needed to earn a $10,000 profit. The conclusion is that the bank should grant the company a loan as the break-even points seem achievable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    17 views4 pages

    Written Assignment Unit 3 Managerial Accounting

    Uploaded by

    Kelvin kikanae
    This document is a written assignment for a managerial accounting course. It includes calculations to analyze the business and financing requirements for a seaplane tour company over three years. In year one, the company's break-even point is calculated at 800 flights based on $36,000 in fixed costs and $45 contribution margin per flight. In year two, the break-even point rises to 868 flights as costs increase. In year three, it is calculated that 1,109 flights would be needed to earn a $10,000 profit. The conclusion is that the bank should grant the company a loan as the break-even points seem achievable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    lOMoARcPSD|9400788

    Written Assignment Unit 3 - Managerial Accounting

    Managerial Accounting (University of the People)

    StuDocu is not sponsored or endorsed by any college or university


    Downloaded by Kelvin kikanae (kkikanae4@gmail.com)
    lOMoARcPSD|9400788

    WRITTEN ASSIGNMENT UNIT 3

    BUS 5110 Managerial Accounting - Term 4

    Moruf A.Lawal

    University of the People

    Expl
    anat
    ion:

    Steps and Calculations

    Year 1

    Step 1 Calculate per flight contribution margin

    Sales price per flight $175

    Variable cost:

    Fuel costs per flight $100

    Boat crew per flight $30

    Total variable cost $130

    CM per flight $45

    Step 2 Calculate annual fixed costs

    Dock fee and use of a small office $6,000 =500*12

    Scheduler salary $30,000 =2500*12

    Fixed cost per year $36,000

    Loan repayment is not fixed cost.

    Step 3 Calculate BEP in # of flights

    Downloaded by Kelvin kikanae (kkikanae4@gmail.com)


    lOMoARcPSD|9400788

    BEP in # of flights = 800

    Fixed cost/ CM per flight

    =36000/45

    Step 4 Calculate CM Ratio

    CM Ratio = 25.71%

    CM/ Sales

    =45/175

    Year 2

    Step 1 Calculate per flight contribution margin

    Sales price per flight $175.00

    Variable cost:

    Fuel costs per flight $100.00

    Boat crew per flight $30.00

    Referral cost $3.50 =175*2%

    Total variable cost $133.50

    CM per flight $41.50

    Step 2 Calculate BEP in # of flights

    BEP in # of flights = 868

    Fixed cost/ CM per flight

    =ROUNDUP(36000/41.5,0)

    Step 3 Calculate BEP in Revenue

    Downloaded by Kelvin kikanae (kkikanae4@gmail.com)


    lOMoARcPSD|9400788

    BEP Revenue = $151,900

    BEP in units*Per unit revenue

    =868*175

    Step 4 Calculate CM Ratio

    CM Ratio = 23.71%

    CM/ Sales

    =41.5/175

    Year 3

    Step 1 Calculate number of flights (units) needed to retain a profit of $10,000

    Required income $10,000

    Add Fixed costs $36,000

    Required CM $46,000

    Required # of flights = 1,109

    Required CM/ Per unit CM

    =ROUNDUP (46000/41.5,0)

    Conclusion:

    Yes, bank should grant loan because BEP seems achievable.

    Reference.

    Walther, L. M. & Skousen, C.J. (2009). Managerial and Cost Accounting. Bookboon.com

    Downloaded by Kelvin kikanae (kkikanae4@gmail.com)

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