HALLEY CASE 5B

Halley Brass is an independent Personal Trainer. Most of her income comes from

contracts Halley has with large companies to advise their senior executives on personal fitness.

She also has contracts to conduct fitness classes at two separate health clubs.

In her spare time, Halley has started producing a monthly newsletter on fitness issues and

tips for the average working person: diet, technique, aging, cardiac research, strength training,

sports injuries, ergonomics, etc...

Halley sells the newsletters to consumers for $4.00 per issue. Her printing and mailing

costs work out to about $1.50 per copy. Halley has a good income from her training contracts

and at this point, she is not paying herself any salary from the newsletter operation. However,

her overhead (phone, home office expenses, insurance...) runs at about $800.00 per month. (For

the foreseeable future, Halley believes her overhead will not change, regardless of volume).

1. How many newsletters must Halley Brass produce each month before she begins to make a

profit?

2. If Halley starts to pay herself a salary of $1 200.00 per month, where will this put her breakeven number?

Halley may decide to stop printing and mailing the newsletter. Instead, she may put the

newsletter on-line and provide it to readers for free, via the Internet. This will increase her

overhead (including salary) to $2 400.00 per month. But her per copy costs (cost of goods

sold) will be eliminated. Halle already knows that she will be able to sell several click-through

ads on her web-site to advertisers hoping that readers will use the link to the advertisers site.

She expects to charge the advertisers about $0.25 (twenty five cents) per click-through".

3. How many Internet hits must Halley get, each month, to break even?

4. Is Halley in 3 different businesses? Explain. What are the accounting and legal issues if

Halley decides to run the businesses as separate from each other?