Answered

Get the answers you need at Westonci.ca, where our expert community is dedicated to providing you with accurate information. Discover reliable solutions to your questions from a wide network of experts on our comprehensive Q&A platform. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.

You are the owner of a parasailing company that is expanding operations to a new beachfront location, and you need to prepare a 3-year analysis for the bank that may loan you the funds to purchase your boat and parasailing equipment. A lot of business is done on a referral basis, where a company pays a fee to a 3rd party to send them customers. However, because of your well-established reputation, you already have received requests for “flights” to be scheduled as soon as you open the new location. Therefore, you expect to break-even the first year but must calculate the number of flights needed. You also need to determine the new break-even point in Year 2 if the location allows referrals, which you believe will cost on average about 2% of the sales price overall. Finally, you need to determine the volume needed to have $10,000 in profit in Year 3. The following information is available:

Sales price per flight $175
Estimated loan payment per month $350
Fuel costs per flight $100
Full-time scheduler salary $2,500 per month
Boat crew per flight $30
$500 per month dock fee and use of a small office on a pier

Calculate the Year 1 break-even quantity, contribution margin, and contribution margin ratio. Explain how the values were determined.
Calculate the Year 2 break-even quantity, break-even sales, and contribution margin ratio. Explain how the values were determined.
Determine the number of flights (units) needed to retain a profit of $10,000 in Year 3, assuming the company does allow for referrals.
Recommend if the bank should issue the loan.

Sagot :

bharathparasad577

YEAR 1-

  • Contribution margin = sales price per flight- Variable cost per flight

                                    = $175 - ($100+ $30)

                                    = $45

  • Annual fixed cost = (Loan payment + Schedule salary+ dock fees) times 12months

                               = ($350+ $2500+ $500)*12

                               = $40200

  • Break even quantity = Annual fixed cost / contribution per flight

                                   = $40200/ $45

                                   =893 flights (Approx)

  • Contribution margin ratio = (contribution per flight/ sales per flight)*100

                                             = ($45/$175)*100

                                             = 25.71%

  • Contribution margin= $40200

YEAR 2

  • Break even quantity= $40200/ $41.5

                                   = 968 flights (approx)

          Contribution per flight= $175- ($100 + $30+ {175* 2%})

                                                 = $41.5

  • Contribution margin ratio= ($41.5/ $175)* 100

                                                     = 23.71%

YEAR 3

  • No of flights needed to retain profit of $10000

No of flights needed = (fixed cost + profit)/ contribution per flight

                                     = ($40200 + $10000)/$45

                                     = 1115 flights needed (approx)

Yes bank should issue the loan.

learn more about this-

https://brainly.com/question/9212451

#SPJ10

We hope our answers were useful. Return anytime for more information and answers to any other questions you have. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Westonci.ca is your trusted source for answers. Visit us again to find more information on diverse topics.