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Solution for Accounting for Managers: Interpreting Accounting Information for Decision-Making 2nd Edition Chapter 10, Problem 20

by Paul M. Collier
158 Solutions 15 Chapters 26256 Studied ISBN: 9780470016091 Management Information Systems 5 (1)

Chapter 10, Problem Scholarly_Places 20 : 1. Scholarly Places is an educational provider that...

1. Scholarly Places is an educational provider that specialises in students from non-English speaking countries. It provides English language tuition in a range of business subjects. Fees charged average £2,750 per student. Student numbers are maintained at no more than 12 per class and tutor and teaching material costs total about £10,000 per class.

Scholarly Places’ most recent Income Statement shows the following:

 

£

Income

396,000

Less: variable costs (tutor expenses & teaching materials)

 

120,000

Contribution

276,000

Less fixed costs:

 

   Rental of premises

80,000

   Salaries of management & administration

90,000

   Office telephone, electricity & supplies

35,000

   Advertising & promotion, including overseas 

   promotional travel

 

80,000

Operating Loss

9,000

 

Because of its current loss-making position, the manager of Scholarly Places has identified its current breakeven point as requiring 4 additional students.

Question

Comment on how the manager has calculated the breakeven and whether there are any problems with the assumptions made by the manager. Make any recommendations you consider are necessary to understand Scholarly Places’ breakeven position.

Step-By-Step Solution

Chapter 10, Problem Scholarly_Places 20

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