Number of events Number of past programme pages events sold 240 320 400 480 Required: The expected profit from the event. (Assume one raffle ticket and one photograph per attendant). marks) (10 Describe how cost-volume-profit (C-V-P) analysis can be applied in absorption costing. (6 marks) (Total: 20 marks) This year, there is concern that an economic recession may adversely affect the success of the event with a fall in the number of guests attending and sale of advertising space in the published events programme. A study of past experience, current prices and quotations shows that the following costs and revenues will apply for the event: Revenue Dinner and dance Sale of dinner and dance tickets: Shs. 5,000 per ticket. Sale of raffle tickets: Shs. 800 per ticket. Photographs: Shs. 100 per photograph. Events programmer Advertising space: Shs. 70,000 per page. Costs Dinner and dance Hire of premises Music band and entertainers Raffle prizes Hire of a photographer Shs. 210,000 840,000 790,000 50,000 2,400 Food per person (subject to a minimum of 4,000 guests) Events programme A fixed cost of Shs. 4,000,000 and a variable cost of Shs. 5,000 per page. A committee appointed to assess the likely outcome of the event has come up with the following data from the club's records: Number of tickets Number of past sold events 2,500 to 3,500 3,501 to 4,500 6 4,501 to 5,500 8 5,501 to 6,500 2 20 50% of the patients in ICU at the beginning of the week will remain in ICU at the end of the week and 50% will be transferred to HDU by the end of the week. 10% of the patients in HDU at the beginning of the week will be transferred to ICU, 50% will remain in HDU, and 40% will be transferred to GW. (i) 85% of the patients in the GW at the beginning of the week will remain in GW at the end of the week, 10% will be transferred to HDU and 5% to ICU. 3. The board of directors believe that the criteria for maintaining patients in the ICU is too strict and should be relaxed so that only 40% of the patients in ICU at the beginning of the week remain there at the end of the week while 60% are transferred to HDU. 4. The staff at the hospital insist that if the proposed criterion is adopted: 20% of patients in HDU at the beginning of the week will be transferred to ICU, 50% will remain in HDU while only 30% will be transferred to GW. () No changes will be expected in the GW. 5. Past hospital records indicate that the hospital serves an average of 4,000 patients weekly. Required: The steady state weekly costs under the current policy. marks) (b) The steady state weekly costs under the proposed policy. (c) marks) Advise the board on the best policy. (2 marks) (d) State the assumptions of the quantitative technique used in solving problems (a) and (b) above. (4 marks) (Total: 20 marks) NUMBER FIVE (a) Highlight the assumptions of cost-volume-profit (C-V-P) analysis, (4 marks) (b) Highlife Club is a charitable organization based in Nairobi. For the last 20 years, the club has held an annual dinner and dance event with the primary aim of raising funds to help the less fortune members of the society NUMBER FOUR Mathai Mission Hospital operates on charity basis. The hospital's board of directors has recently complained about the increasing size of the cost budget insisting that the management should cut down on costs. The major concern of the board is the cost of maintaining patients at the intensive care unit (ICU). The following information is available on the operations of the hospital: 1. The average cost of maintaining a patient at the ICU per week is Shs. 200,000 compared to Shs. 100,000 per week incurred in maintaining a patient at the high dependency unit (HDU) and Shs. 50,000 per week of maintaining a patient at the general ward (GW). 2. Past information on patients indicates that: