Aman International School has a total of 180 students consisting of 6 sections with 30 students per section. The school plans for a picnic around…

CA Intermediate · Cost and Management Accounting · MTP · May 2024
Aman International School has a total of 180 students consisting of 6 sections with 30 students per section. The school plans for a picnic around the city during the week-end to places such as Prayag zoo, the Capi Park, Azad planetarium etc. A private transport operator has come forward to lease out the buses for taking the students. Each bus will have a maximum capacity of 50 (excluding 2 seats reserved for the teachers accompanying the students). The school will employ two teachers for each bus, paying them an allowance of 500 per teacher. It will also lease out the required number of buses. The following are the other cost estimates: Cost per student (₹) Breakfast 50 Lunch 100 Tea 10 Entrance fee at zoo 20 Rent 6500 per bus. Special permit fee 500 per bus. Block entrance fee at the planetarium - 2500. Prizes to students for games - 500. No cost are incurred in respect of the accompanying teachers (except the allowance of 500 per teacher). You are required to PREPARE: A flexible budget estimating the total cost for the levels of 60, 90, 120, 150 and 180 students. Each item of cost is to be indicated separately.COMPARE the average cost per student at these levels.WHAT will be your conclusions regarding the break-even level of student if the school proposes to collect 400 per student?

Suggested Answer and Working Notes:

(a) Flexible Budget for different levels No. of Students 60 (₹) 90 (₹) 120 (₹) 150 (₹) 180 (₹) VARIABLE COST Breakfast 3000 4500 6000 7500 9000 Lunch 6000 9000 12000 15000 18000 Tea 600 900 1200 1500 1800 Entrance fee 1200 1800 2400 3000 3600 Sub-total (A) 10800 16200 21600 27000 32400 Variable cost/unit 180 180 180 180 180 SEMI-VARIABLE COST Bus rent 13000 13000 19500 19500 26000 Special permit fee 1000 1000 1500 1500 2000 Allowance for teachers 2000 2000 3000 3000 4000 Sub-total (B) 16000 16000 24000 24000 32000 FIXED COST Block entrance fee 2500 2500 2500 2500 2500 Prize to students 500 500 500 500 500 Sub total (C) 3000 3000 3000 3000 3000 Total cost (A + B + C) 29,800 35,200 48,600 54,000 67,400 (b) Cost per student 60 90 120 150 180 Cost per student 496.67 391.11 405.00 360.00 374.44 (c) Break-even level Particulars ₹ Collection per students 400 Less Variable Cost 180 Contribution 220 Since semi-fixed costs relate to a block of 50 students, the fixed and semi-variable cost for three level will be: Level of Student 51-100 101-150 151-200 Fixed + Semi-variable cost (₹) 19,000 27,000 35,000 Contribution per unit (₹) 220 220 220 Break Even level of students 86 123 159

Topics: Budgets and Budgetary Control

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