Assignment
Part A
Breakeven analysis for Santa Voyages
Santa voyages Inc., is a company operated by an individual as a summer tourist attraction on the great lakes. It operates a sailing schooner offering day cruises for individuals and groups. Over the last few years, the average number of tourists per cruise was 30.The average charge per person for the cruise , including group discounts was $ 100.The company operates from mid-may until mid-September. On average the ship sails 100 days during this period.
The Sailing bird (the name of the schooner) requires a crew of 6 and is captained by the owner of the company. University students with extensive sailing experience have been willing to work on a per diem basis of $ 100. They are paid only if the ship is cruising. The ship provides non-alcoholic refreshments and a light lunch. These are required daily from a local delicatessen and cost on average $ 25 per person. The daily operating expenses, fuel and miscellaneous supplies average $ 50 a cruise. The company has a variety of annual expenses including: maintenance, depreciation, marketing, licenses , Etc.. Totaling approximately $ 85000.
Required:
1. Compute the revenue and variable expenses for each cruise
2. Compute the number of cruises the Sailing bird must have each year to breakeven. Is there any equation that can be used to determine this number?
3. The owner expects a total return on capital and remuneration for being the captain of $ 125000. Using the concept of "contribution margin" and a cost-volume-profit notion, estimate how many cruises the Sailing bird needs to make to reach this objective? Is there a realistic expectation?
4. Prepare a contribution margin income statement for Santa Voyages Inc.,
Part B
Budgeting for Davidson Manufaturing Company
Davidson Manufacturing needs to prepare a cash budget for December 2016. The cash balance at the beginning of December is $9,000. The actual sales for October and November and expected sales for December are:
|
Information
|
October ($)
|
November ($)
|
December ($)
|
|
Cash Sales
|
13,000
|
10,500
|
14,800
|
|
Sales on Account
|
40,000
|
60,000
|
80,000
|
|
Total Sales
|
53,000
|
70,500
|
98,800
|
Sales on account are collected over a three-month period in the following ratio:
10% in the month of sale,
70% in the month following sale
18% in the second month following sale
2% remaining are uncollectible.
Additional information includes:
(a) Purchases of inventory will total $ 50,000 for December; 20% will be paid for in December. Accounts payable from November's inventory purchases is $ 32,000, all of which will be paid in December.
(b) Selling and administrative expenses are budgeted at $ 26,000 for December; of which $ 8,000 is for depreciation.
(c) Equipment costing $ 36,000 will be purchased for cash during December, and other miscellaneous cash expenses of $ 6,000 will be paid during December.
Required
Prepare the cash collections for the month of December and also a Cash Budget for December. Show all working clearly.