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Compute the shutdown point

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Reference no: EM132617510

During the first week of July, the Aurora Beach Resort has been contemplating whether to shut down temporarily during months August-September due to minimal tourist check-ins. This is based on their history since commencement of their business. During these months, they only have an average of 60 visitors from the usual 200 visitors per month.

Their income statement for the month just ended are as follows:

Aurora Beach Resort Income Statement June 30, 2020

Revenues (200 visitors)                   Php 400,000

Variable costs                                  160,000

Fixed Cost                                      125,000

Operating Income                        Php 115,000

If Aurora will temporarily shutdown its operations, it will still incur P75,000 of its fixed costs. Upon restarting their operations, they will spend P35,000.

Problem 1. How much is the irrelevant cost in the problem.

Problem 2. Can you perform the incremental costing analysis on the problem and provide recommendation to Aurora's management?

Problem 3. Compute the shutdown point and what is your comment about your answer?

Problem 4. Can you please provide qualitative factors that is relevant to the situation?

Reference no: EM132617510

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