Chuck Justice operates a Competition Go-Kart racing track on his 40-acre ranch in Monterey County California, just a short distance from world famous Laguna Seca.

The facility includes a 1.5-mile track, 60 pitstop work stations each with a covered shop/work area, piped in pressurized air, deep sinks with running water and cleaning solvent, 110/220 electrical service, and benches for working on, tuning up, changing engines and tires, etc. on the Go-Karts.

Fixed Operating Costs are as follows: Depreciation on the facilities $3,600 per year. Real estate taxes $1,200 per year. Utilities average $320 per month. General track and facility maintenance averages $105 per month. Chuck's son is employed to operate and maintain the facilities at an annual salary of $27,600. Variable Operating Costs are as follows: Engineering students from Monterrey Peninsula College work as interns. One engineering student can be assigned to as many as 6 pitstop workstations to trouble shoot and provide ideas regarding sprocket ratios, engine issues, track temperature/tire pressure, etc. As an intern, they are paid $21 per work station per day.

The pitstop work stations rent for $35 per Go-Kart owner per day.

Instructions

(a) Determine the annual number of pitstop work station rentals and revenue Chuck needs to break even using the contribution margin technique.

(b) If the current annual number of pitstop workstation rentals is 6,915, calculate the "margin of safety".