Alan decides to run a small private music teaching business alongside his full-time job with the permission of his current employer. He believes that he can charge 50 per hour for his lessons but will have direct travel and promotion costs of 30 per hour. He can rent a music studio for 1,500 per month, with a non-returnable up-front deposit of 4,800 (which he wants to treat financially as split across 12 months). He has 120 chargeable hours of teaching time available per month, and this will enable him to continue meeting his employers expectations.

Using the 12-month split of the studio deposit, how many hours will he need to work for to achieve an accounting break-even? If he would like to earn 5,000 from this business, how many months will he need to work at full reaching capacity to achieve this? Alans accountant suggests that the deposit on the studio should be treated as a one-off up-front cost to enable him to calculate the number of hours required for a cash break-even before Alan is in a position to retain any earnings. How many hours of teaching would be required to reach this position?