In 2019, this shuttle service continue at seven days per week with the help of employee drivers. Each operating day averages 30 trips over an extended 8-hour operating period. Shuttle cycle time will be reduced to every 15 minutes (4 per hour) from every 12 minutes (5 per hour) in 2018 to conserve fuel and increase the number of passengers on each trip. The minimum capacity of the new smaller shuttle van is 9 passengers per trip (see next section).

For 2019, shuttle ride prices increased to $4 per ride or 6 rides for $20 on a punch card. Methot decided that this increase is necessary to due to increased operating expenses fuel, insurance, and additional employee driver costs. It is expected that 90% of the passengers will purchase punch cards and the remainder will pay cash.

Methot notes two (2) additional drivers would share the 7 days each week at the rate of $18 per hour ($15 per hour plus mandatory payroll taxes) if hired as employees in 2019. Gasoline and minor maintenance expenses are estimated to average $2.10 per round trip cycle assuming an average cost of $1.30 per litre. Fixed expenses would include insurance of $5,000 for the season, government inspections and fees of $500 and an allowance for major maintenance of $3,000 annually.

An estimate of the expected average utilization of rate of a 9-passenger van is:

Day count Weekdays

April-19 18 May-19 17 June-19 16 July-19 18 August-19 16 September-19 16 October-19 18

% Util Weekend

30% 12 40% 14 40% 14 75% 13 75% 15 40% 14 25% 13

% Util Total

55% 30 90% 31 90% 30 80% 31 80% 31 60% 30 60% 31

Average

40.0% 62.6% 63.3% 77.1% 77.4% 49.3% 39.7%

Weekend days include Friday, Saturday, Sunday and Statutory Holidays

1) Create a monthly contribution margin style income statement for Mostly Mental Shuttles business at Kamloops Bike Ranch only based on the expected 2019 summer season of operations. Provide comments on your results.

2) Compute the following individual net present value of each of the three shuttle van capital expenditures (Note: all GST amounts paid are working capital recovered at acquisition):

a) new 2019 Ford Transit T150 10 passenger van

b) new 2018 Ford Transit T350 15 passenger van (Exhibit 8)

c) used 2017 Ford Transit T150 10 passenger van (Exhibit 9)

3) Review your net present value calculations for the three shuttle vans.

Based on these calculations, what would your recommendation be to Methot? Why?

4) Compute the following individual net present value for the new medium size Huckwagon mountain bike trailer (Note: treat GST amounts paid as working capital recovered at acquisition as they are refundable to the company). Provide comments on your results.

5) You have recently learned about Balanced Scorecard and Key Performance Indicators. Detail how Methot could apply some of the concepts you have learned about for similar industries to help his growing business.

6) Are there any other qualitative concerns or suggestions that you believe need to be included in any recommendation to Methot? If so, please list these item(s) and provide an explanation as to why.