Note : the Answers should be Computerized and in details Exercise 1: (10 Marks)

Question

Note : the Answers should be Computerized and in details

Exercise 1: (10 Marks) Dublin Accounting School teaches students how to become a good accountant. The following relates to the income and costs analysis for the school for 2016 Fees charged * Senior Accounting Class $50 per class per student Junior Accounting Class - $30 per class per student Costs . Resources $100 per senior students, $75 per junior students Teacher S25,000 per annum (there are 2 teachers in the school. One for senior classes, one for junior class) Class Consumables (such as whiteboard markers, worksheets) - $70 per student °Administrative Expenses $30,000 per annum Finance Costs $7,000 per annum There are 40 lessons in a school year for both senior and junior levels. Suppose there are 50 senior students and 40 junior students enrolled. Each class is made up of 8 students and school fees are not refundable.

Explanation / Answer

A) CALCULATION OF INCOME STATEMENT :-   

TOTAL INCOME:-

FEES CHARGED SENIOR [50*40*50] 100000

JUNIOR[30*40*40] 48000   TOTAL 148000 LESS VARIABLE COST :- RESOURCE COST SENIOR [100*50] 5000 JUNIOR[75*40] 3000   8000 CLASS CONSUMABLE [70*90] 6300 14300   CONTRIBUTION 133700 LESS PAYMENT TO TEACHER 25000 LESS ADMINISTRATIVE CHARGES 30000 LESS FINANCE COST 7000   NET PROFIT 71700

B) TOTAL COST IN 2017:- PAYMENT TO TEACHER 25000 ADMINISTATIVE EXPENSES 25000 FINANCE COST 7000 TOTAL 57000   

NUMBER OF STUDENTS TO ACHIEVE BREAKEVEN = FIXED COST FEES PER CLASS * NO.OF CLASS

57000 = 29 50*40

C) NUMBER OF CLASSES TO ACHIEVE BREAKEVEN = FIXED COST FEES PER CLASS* NUMBER OF STUDENT

57000 50*50 =23

D) NUMBER OF STUDENT REQUIRED TO ACHIEVE PROFIT OF 25000:-   

FIXED COST+PROFIT FEES PER CLASS *NO.OF STUDENTS

57000+25000 50*50  

=33  

E) MARGIN OF SAFETY:- TOTAL CLASS - BREAKEVEN CLASS

33-23=10

F) MARGIN OF SAFETY MEANS DIFFERENCE BETWEEN TOTAL AND BREAKEVEN.

  

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