Question 3 write your answers commencing from page 9

1. Hydra Ltd is a company that sells sports glasses. The business profit calculation for last year is as follows:

Sales revenue (2,000 units x $25)	$50,000
Less: Variable costs	(20,000)
Contribution margin	30,000
Less: Fixed costs	(22,000)
Profit	8,000

2. Break-even is composed of three financial figures: selling price per unit, variable cost per unit, and fixed costs.

[TASK] Using these factors, devise two strategies to help a hotel operator which has continually failed to achieve the break-even point (i.e. very low occupancy rate). Discuss your strategies in details.

[8 marks]

3. Woof Ltd sells pet food in 10-kilogram bags for $12.40 per bag. Sales estimates (in the number of units) for the two months of the year are as follows:

	Bags
January	20,000
February	17,000

All sales are cash sales.

Woof Ltd purchases bags of pet food at $9.40 per bag on credit and pays for them the month after the purchase. Purchases estimates (in the number of units) for the two months of the year are as follows:

	Bags
January	19,250
February	16,500

Last December purchases were 21,000 bags.

General and administrative expenses total $8,000 per month (including $10,000 depreciation), and Woof Ltd pays for these expenses (except for depreciation) in the same month they are incurred. January's current liabilities (all to be paid in January) total $35,500. The business' cash balance on 1 January is $38,000.

[TASK]

1. Calculate the total cash receipt for January and February. Provide workings.
2. Calculate the total cash payments for January and February. Provide workings.
3. Calculate the cash balance at the end of January and February. Provide workings.
4. Explain two benefits of preparing a cash budget for a company.

[10 marks]