4 [Total: 13] Friends of yours have decided to start a mobile bungee jumping facility and have registered their business as BG Ltd for the purpose of trading. No equipment has been acquired as yet. The bungee jumping training procedure involves the following: A group of six people get into cage, which is hoisted up to a certain height by making use of a crane. One person jumps at a time, the only connection to the cage being a rubber band. The one end of the rubber band is fixed to the cage; the other end is fixed to the waist or legs of the person jumping. After swinging for some time on the rubber band, the person is released onto a safety mattress on the ground, ready to let a new group of people get in. Your friend intends making the facility available at different places, depending on the events taking place in a specific area. The unit that will be acquired must for this reason be mobile. There are only two suitable models available. The details are as follows: Height of jump Cost price per unit Duration of session, based on a group of six people (including the time required to hoist the cage) Annual fixed operating expenses Variable cost per jump Selling price of tickets per jump Budgeted sales Model A 45 metres R450 000 Model B 60 metres R500 000 45 minutes 60 minutes R389 325 R423 950 R13 R100 R13 R135 R748 800 R1 010 800 Maximum number of jumps (100% capacity) 7 488 jumps 7 488 jumps The facility will be in operation from 9am daily on every Saturday and Sunday throughout the year. The last jumpers have to be on the ground by 9pm. It is envisaged that regardless of which model is acquired, it would operate at full capacity. Required: 4.1 4.2 4.3 Determine the number of jumps to break even in respect of model A and model B. (4) Determine with regard to model A and model B, how many jumps would ensure an annual net profit before tax of R302 325. (6) Based on your calculations in 4.1 and 4.2 above, decide which model should be acquired and why. In addition, state three factors that your friend should take into account before deciding which model to acquire, other than merely the estimated profitability of each model. (3)