AA School of Accountancy is planning to run a one-day revision course in the Cost and Management Accounting. Students will be charged a fee of Rs 1,250 that comprises refreshments, lunch and all materials. The maximum number of students can be comfortably accommodated on the course is 120. The estimated costs of running the course are as follows:
Required:
Question 1: Compute the break-even point in terms of the number of students needed for the course.
Question 2: What would be the profit or loss if only 75 students were registered on the course?
Question 3: Use a break-even chart to explain accurately the break-even point and the profit or loss computed above (the use of graph paper is optional). Find out the breakeven point in sales value and the Margin of Safety.
Question 4: Describe in brief the helpfulness of the margin of safety to someone who is about to launch a new business.
Question 5: List four limitations of the beak-even analysis.