Calculate the break-even point in trips per month

Assignment Help Auditing

Reference no: EM132300093

Learning Outcome: Formulate budgets and construct a cost-volume-profit analysis using practical scenarios

Objective: The objective of this assignment is to effectively use spreadsheet software to provide cost- volume-profit analysis

CASE STUDY USING EXCEL SPREADSHEET

You work for Adelaide-based Tourperience Ltd which provide tourists and visitors with ‘experiences' of Adelaide and South Australia. Your manager is currently investigating introducing another product, which are ‘De-luxe' helicopter rides over the Barossa Valley. Each trip would be 50km in total.

Your manager wants you to use cost-volume-profit analysis in order to help assess the plan's feasibility. She provides you with the following estimated data:

Selling price per trip: $600 (total for 3 customers - trips only run with 3 customers) Costs:
Fuel: $50 per trip
Barossa ‘goodie bag' per customer: $40 Helicopter rental per month: $20,000 Insurance per month (unlimited trips): $1,000
Pilot costs: $5,000 per month plus $100 per trip

Maintenance costs are difficult to estimate but data from a similar company in a different location shows that these monthly costs were $11,000 when 5,000 kms were flown and $5000 when 1,500 kms were flown.

REQUIRED:

Calculate the following:

1) The Break-even point in trips per month

2) The Break-even point in dollars of revenue per month

3) Assuming a profit after tax requirement from the Helicopter trip business of $120,000 per year and a tax rate of 30%, calculate:

a) Trips required per month to obtain target profit
b) Revenue required per month to obtain target profit

Your manager has requested that the spreadsheet is easy to use for ‘What-if' analysis - so she would like to be able to change some of the inputs to see the impact on the calculations above - for example, if the Helicopter were able to be rented more cheaply or the selling price was increased.

Reference no: EM132300093

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Reviews

len2300093

5/6/2019 4:19:37 AM

Please make sure you follow the guidelines noted in your subject outline especially those relating to the presentation of written work, late assignment policy and academic integrity. Hence 6 Marks are allocated to ease of use and accuracy for ‘what-if’ analysis (which will also depend on the formulas used) 2 marks are allocated for the general presentation of the spreadsheet. Assignment Marking Sheet Allocated Marks Marks Awarded Comment 1 BEP in trips 4.00 2 BEP in dollars 2.00 3a Trips required for target profit 4.00 3b Revenue required for target profit 2.00 Ease of use for ‘What-if’ analysis 6.00 Presentation 2.00 Total 20.00 Weighted Total 10.00

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