Energy Experiences Pty Ltd runs camps for school children and sporting clubs that provide 3 days of
Question:
Energy Experiences Pty Ltd runs camps for school children and sporting clubs that provide 3 days of canoeing, horseriding, abseiling and skiing. As a graduate with a sports and recreation degree, you have eventually worked your way up to managing the camps. The accountant has presented you with the following income statement and wants to work with you to improve the company’s financial position so that it may continue in business.
Amount | Percentage | |||||
Sales revenue (2500 campers) Variable cost of sporting activities Variable promotional and other expenses | $ | 750000 375000 150000 | 100 50 20 | |||
225000 | 30 | |||||
Fixed expenses: | ||||||
Selling and site maintenance Administrative Finance and other | 150000 75000 75000 | 20 10 10 | ||||
300000 | 40 | |||||
Loss | $ | (75000 | ) | (10 | ) |
Required
A. Taking into account the nature of the activities provided by Energy Experiences Pty Ltd, what costs are likely to be fixed regardless of the number of campers and what costs are likely to vary in total with the number of campers?
B. Suggest specific ways in which the company could make a profit by changing its pricing, reducing fixed costs and reducing variable costs.
Contribution MarginContribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett