Angela French owns the Angel Puppy Parlour, a mobile pet grooming service. She is keen to expand
Question:
Angela French owns the ‘Angel Puppy Parlour’, a mobile pet grooming service. She is keen to expand the business and recently approached her local credit union for financial support. In advance of her next meeting with the credit union manager, she has been asked to provide projected costs for running the business. Lacking any knowledge of management accounting, Angela has approached you for help. She has made the following data available to you.
Month Activity level (no. of clients) Total costs
June 80 €4,100
July 130 €5,100
August 60 €3,700
September 30 €3,100
October 40 €3,300
November 100 €4,500
Required:
(A) Prepare a scatter graph using the data provided by Angela (note: graph paper not required). Using your graph, determine the approximate monthly fixed cost and approximate variable cost per client.
(B) Angela anticipates serving 150 clients in December at a sales price of €40 per client.
(i) Using the high-low method estimate a cost function for the business and determine the estimated total costs for December.
(ii) Determine the budgeted breakeven point in units and sales revenues for December.