Present examples of such analysis which may be useful to her

Assignment Help Cost Accounting

Reference no: EM13907527

A friend is deciding whether or not to start a business and discusses the matter with you. The business would involve assembling and selling a component that she has invented. She can obtain the parts required from various manufacturers.

She has estimated that she can sell 5,000 of these components a year at a selling price of £30 per unit. The variable costs of the component are £20 per unit and fixed costs would be £30,000 per annum. These fixed costs do not include a salary for your friend. She currently earns £25,000 per annum in her present job and would have to give this job up if she started her own business. Your friend is rather cautious and she is worried in case any of her estimates are incorrect.

You suggest that she uses cost-volume-profit analysis to help her make the decision and you are required to present examples of such analysis which may be useful to her. The information is to be presented in mathematical form.

Reference no: EM13907527

Questions Cloud

Explaining net present value and future value : You have been asked by a manager in your organization to put together a training program explaining Net Present Value (NPV) and Future Value (FV) and how they are used to evaluate the price of stock. Give an example of how to use the formulas for NPV..

What was the firms times interest earned ratio : Cosmos is Inc.'s sales last year were $340,000, its operating costs were $250,000, and its interest charges were $13,500. What was the firm's time’s interest earned (TIE) ratio?

Present and future values and security valuation : We examined two important topics in finance this week: (a) present and future values and (b) security valuation. Critically reflect on the importance of present and future values. What factors must be considered when calculating present and future va..

Calculate the payments and loan balances for years : A basic 30-year ARM is made for $300,000 with an initial interest rate of 2%. Payments are monthly. The rate will reset every year. The index is the one-year Treasury and there is a 2% margin. There are no relevant caps. Calculate the payments and lo..

Present examples of such analysis which may be useful to her : You suggest that she uses cost-volume-profit analysis to help her make the decision and you are required to present examples of such analysis which may be useful to her. The information is to be presented in mathematical form.

Develop an alternative analysis : Develop an alternative analysis for a family of three, where both parents work fulltime and the third person is a young child, looking to purchase a $150,000 dwelling and they are considering whether to purchase a single family home, a townhouse, or ..

Below are departmental income statements : The manufacturer is considering dropping its electric guitar department since it has a net loss.

Would forrest gump have made money in 1994 : If Hanks and Zemeckis had demanded their original fees up front instead of taking a percentage of gross box office receipts, would Forrest Gump have made money in 1994?

What are arithmetic and geometric returns for stock : A stock has had returns of −26 percent, 6 percent, 34 percent, −5 percent, 28 percent, and 19 percent over the last six years. Required: What are the arithmetic and geometric returns for the stock?

User Account

All Pages