Activity 4 (1)

Class Activity 4

Financial cost analysis

Before you can cost products or services effectively, analysis of what costs is required?

Product cost is different from sales price. Product cost is simply the cost of a single unit of product. You may wonder how a Gucci bag or a can of Coca-Cola is priced. Well, it’s all because of product cost analysis. By having the product cost analysis, you’ll be able to at least get the most accurate cost of your product even in the tourism industry.

Give an example of a packaged tourism product and describe the individual components.

For each component describe the direct and indirect costs.

Explain the difference between fixed and variable costs.

Fixed costs:

Variable costs:

Budget Analysis

What is budget deviation analysis?

Give at least 5 examples of where budget variances could occur.

Why do you think variances occur?

Why is it necessary to regularly check actual income and expenditure against budgets at regular intervals?

How often should this be carried out?

Classify the following into indirect or direct costs to a business, and advise whether they are fixed or variable costs:

Stock

loan payments

......

loan payments

equipment

transport costs

packaging

wages

petrol

marketing

stationery

worker’s compensation

Variance Exercise

Look at the following revenue statement for a café for the first quarter of 20XX. Using the figures shown, calculate the missing items. Fill in ‘F’ for a favourable variance (i.e. an increase) or ‘U’ for an unfavourable variance i.e. (a decrease). Calculate the missing items and fill in your answers.

March 20XX

Add the budget figures to an XL spread sheet and insert another month – April.

Include Variance, % and F/U

Add an advertising expense $5,000.00

Increase revenue by 35%

Food supplies increased by 5%

What has changed for the cafe in the month of April

What was the trigger that caused this variance?

Deviations can be considered under the heading of: Give your understanding for these terms.

Unforseen

Foreseen

Excessive deviations

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