question 1 30 marks waterfun club is a leading swimming and yoga club
Question 1 (30 Marks)WaterFun Club is a leading swimming and yoga club. The monthly incomestatements for the quarter ended 30 Nov 2020 for are as follows:
Required:1a) Identify each of the above expenses as variable, fixed or mixed. 1b) Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. 1c) Calculate the breakeven number of members the club has to serve per month.Assume that each member is charged a membership fees of $1,000 per month. 1d) Assuming, the company has targeted for a profit of $150,000 for the coming month. What is the margin of safety in dollar value if the company achieved its targeted profit. 1e) For 2021, Management is proposing to expand to Malaysia. As a trial for the initial expansion, WaterFun will incur additional monthly fixed expense of $60,000. Variable costs per customer is expected to increase by $90. Membership fee per customer remains unchanged.How many customer memberships must sign up in Malaysia if WaterFun wants to maintain its current profit level as a whole assuming that all other revenue and costsremain unchanged. 1f) Using the answers in c) and d), explain the significance of break even analysis and margin of safety to management. Provide two solutions for what WaterFun can do, to reduce its break even point. 1g) Explain how would an understanding of cost behaviour help the managers indecision-makingand planning.
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