Management accounting & decision making Essay Example | Topics and Well Written Essays - 2000 words

Management accounting & decision making - Essay ExampleAs at folk 30, 20X0 Property, Plant and Equipment 1,840,000 Less Depreciation (133,167) Net Book Value 1,706,833 Inventory 9,000 Receivables 144,585 Cash 172,700 Total Assets 2,033,118 Owners cracking 2,000,000 Profit for the year (92) Creditors 12,960 Overhead cost payable 20,250 Total capital and liabilities 2,033,118 The above statement presents the immediate payment budget, income statement and the statement of financial position for the six months ended September 30. In the forecasting of the notes budget, the effect of inflation has been ignored. During the six months period the inflation is expected to rise and it will impact both the variables of the projections. In addition, it has been assumed, in the cash flow forecast, that the credit sales will be settled at the end of two months. Same assumption has been applied in the cost of purchases which is being assumed to be settled at the end of the next month in which the sales were made. It has also been assumed that purchases, in order to maintain the entry take aim to ? 10,000, are included in the total cost of purchase. In the income statement, it has been assumed that China glass and cutlery, bed linen and towel and miscellaneous items including toiletries are revenue ingestion and will be consumed entirely during the received period. The loss in inventory is proportionately divided amid the two half of the years and half of the expected loss is taken. The corresponding impact has been taken in the inventory. Task 2 (a) As per the given scenario, the average spending has decreased by 15% which representation that the average spending in actual turned out to be 127.5. If we substitute this figure with the current expected occupancy rate, the revenue is likely to decrease. The following table presents the revised income statement Income Statement In ? For the six months ended September 30,20X0 Revenue 386,325 Cost of Purchases (77,265) China glass and cutlery (10,000) Bed linen and towel (10,000) Miscellaneous items including toiletries (5,000) Labor Cost (77,265) Overhead Cost (96,581) Depreciation (133,167) Losses in inventory (1,000) Net loss (23,953) As apparent from the above table, the net loss has further change magnitude which would adversely affect the financial outlook of the company. In order to maintain the previous less of profitability (in this model net loss of 92) the company is required to maintain the same level of sales. This can only be done by increasing the level of occupancy so that the sales remain the same at ?454,500. In order to maintain the same level of sales the monthly occupancy should be increased by 20% monthly. Since the occupancy rate of august is already 90%, it can only by increased to a perfect 100%. Following is the revised occupancy rate if the previous level of sales is desired Monty Occupancy Rate April 24% May 36% June 61% July 97% frightful 100% September 73% Average 65% Thus the revise sales