Question 7

Question 7 – Idsley House Rest Home

Mike and Margaret Metcalf are in partnership as ‘Idsley House Rest Home’ in the North East of England.

You are a self employed accounting assistant and the Metcalf’s are one of your clients who you visit on a monthly basis.

On a recent visit to the home you have discussed the preparation of the budget for year ended 31 July 2001; and an extract of this is shown below.

There are 11 residents in the home and the average charge per resident week is £189.59.

Budget Operating Statement Year Ended 31 July 2001

	£
Income from Residents	108446
Less Expenses:
Staffing	32159
Food Costs	19219
Laundry	1922
Insurance	2048
MV Running Costs	1844
Office and Admin	1312
Repairs and Maintenance	525
Heat, Light and Power	5617
Loan Interest	7908
Depreciation: Vehicles	2000
Furniture and Fittings	2500
	77054
Net Profit / (Loss) for Year	£31392

Your discussion centred on the analysis of costs – fixed and variable and break-even concept.

In your discussion it was noted that one third of the motor vehicle running costs were fixed; and two thirds of the heat, light and power cost was variable. Staffing is considered to be a fixed cost.

Questions

1. Prepare a schedule to show the fixed and variable costs in total for the budget period. (10 marks)

2. Calculate the contribution per resident per week. (10 marks)

3. Calculate the break-even point per resident week. (10 marks)