Discuss the limitations of cvp analysis

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A driving school employs a number of casual driving teachers and leases a fleet of cars. The driving teachers work flexible hours and paid an hourly rate. At present the school's pupils pay $390 per lesson and the school's cost structure is as follows:

Variable cost per lesson $210

Fixed cost per month $180,000

Budgeted sales amount to 2,200 lessons per month.

Required

Problem (1) Calculate the school's breakeven point in lessons, the margin of safety, and the monthly profit.

Problem (2) The case driving school is now facing competition from other driving schools. It has become necessary to reduce the selling price by $45. The variable cost per lesson will increase by $15. Calculate the revised monthly breakeven point in lessons, and the number of lessons which must now be sold each month in order to achieve the original budgeted monthly profit.

Problem (3) Discuss the limitations of CVP analysis.

Reference no: EM132946556

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