Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

As Roya expands her business, she is thinking about incorporating and is wondering if you can provide any insight on the pros and cons of

image text in transcribed
As Roya expands her business, she is thinking about incorporating and is wondering if you can provide any insight on the pros and cons of incorporation. Under an incorporated set-up, Roya would collect a monthly salary of $2,000 from the company to start. If she scales back her other job, Roya would bump the monthly salary up to $3,000. Roya has heard of cost-volume-profit (CVP) analysis and is wondering if the $3,000 monthly salary is treated as a fixed expense and other expenses are listed in the table below, how many annual tutoring hours (and total revenues) would she need to break-even? What would be her margin of safety? What does her CVP graph look like? Projected costs for 2024: Business cost item Expected cost Number of expected per occurrence occurrences per month Fuel expense $60 Vehicle maintenance expense $250 0.25 Vehicle insurance expense $150 Computer/printer/equipment maintenance $80 0.125 Office supplies purchase $40 H Roya is wondering how the above costs would be recorded in a proper accounting system-she feels everything in the table is a variable cost but is not sure. Another concern is that she uses the car for personal driving along with business use (estimated personal use of the vehicle is 30% of the mileage). Roya has heard of depreciation and is wondering how her car would be accounted for. Roya feels as if she has done a decent job of tracking numbers but wants advice on getting proper accounting help. She wants an idea of how her business is trending generally month to month for the past year as well as annual comparisons of 2023 and projected 2024. Insight on any ratios which could be of help to her is also greatly appreciated. Finally, Roya wants to know how she can evaluate her performance by comparing actual results to what she had budgeted

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel,  Jerry J. Weygandt,  Jill E. Mitchell

8th Edition

1119791057, 978-1119791058

More Books

Students also viewed these Accounting questions