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Essay / Research Paper Abstract
This 10 page paper answers a set of questions set by the student. The first part of the paper presents a fictitious breakeven analysis, demonstrating the way that the breakeven point may be calculated with reference to fixed and variable costs, as well as a demonstration of the calculation of a margin of error. The second part of the paper considers the importance and role of costing and budgeting. The third part of the paper looks at the importance and value of cash flow statements. The last part of the paper discusses the value and use of investment assessment. The bibliography cites 6 sources.
Page Count:
10 pages (~225 words per page)
File: TS14_TEBEquest.rtf
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Unformatted sample text from the term paper:
margin of safety. To under take a break even analysis it is necessary to look at different types of costs; Generally speaking there are two types of costs in accounting,
fixed costs and variable costs. Fixed costs are those costs that will remain the same regardless of how much is produced. For example, the cost of the building, the cost
of insurance, rates and other non changing costs, which can include head office costs (Chadwick, 2004). Variable costs are the costs that will vary directly in line with the level
of production, for example in the case of a transport company running buses, the cost of fuel and the wages of the staff operating the bus routes. If we look
at the way that these costs are calculated we can use them to assess the break even level. The costs are used to calculate the contribution, this is the revenue
that will be used to pay the fixed coats, and when the foxed costs are covered it will be used to create profit. The contribution level is the revenue less
the variable costs. The break even point is where there is sufficient contribution generated to cover the fixed costs. Here we will make some assumption, with the overhead or
fixed cost assumed to be $500,000, which is made up of the lease costs for the busses, the head office costs and all costs which do not change regardless of
the level of business undertaken, or number of trips provided. Marketing costs may also be provided within this cost. Next we need to assess the variable costs, these
are the costs of running the busses, the variable costs include the cost of the fuel, the cost of staffing, maintenance of the busses. Here we will also make some
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