Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

During the first week of July, the Aurora Beach Resort has been contemplating whether to shut down temporarily during months August-September due to minimal tourist

During the first week of July, the Aurora Beach Resort has been contemplating whether to shut down temporarily during months August-September due to minimal tourist check-ins. This is based on their history since commencement of their business. During these months, they only have an average of 60 visitors from the usual 200 visitors per month. Their income statement for the month just ended are as follows:

Aurora Beach Resort Income Statement June 30, 2020

Revenues (200 visitors) Php 400,000

Variable costs 160,000

Fixed Cost 125,000

Operating Income Php 115,000

If Aurora will temporarily shutdown its operations, it will still incur P75,000 of its fixed costs. Upon restarting their operations, they will spend P35,000.

1. How much is the irrelevant cost in the problem.

2. Can you perform the incremental costing analysis on the problem and provide recommendation to Aurora's management?

3. Please compute the shutdown point and what is your comment about your answer?

4. Can you please provide qualitative factors that is relevant to the situation?

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_2

Step: 3

blur-text-image_3

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

Modern Advanced Accounting In Canada

Authors: Hilton Murray, Herauf Darrell

9th Edition

1259654699, 978-1259654695

More Books

Students also viewed these Accounting questions

Question

What does stickiest refer to in regard to social media

Answered: 1 week ago