The purpose of Part A of this assignment is to examine how enterprise profit is impacted by adjustments in price, allocations, and expenses (using an EXCEL workbook - example). The lecture notes on Fleet Economic Performance (Unit IV) outlined categories of fleet expenses and the impact that price and fish allocations play on profitability of an average enterprise. The metrics were based on information from 2006 (a low-price year - Excel workbook tab "Profit Analysis 2006"). It is possible to simulate the impact of price on average enterprise profit in the adjacent year (2007). It is also possible to extrapolate to the current period (2022). However, the 2022 extrapolation requires inflation adjustments (and some assumptions) to bring expenses to current period levels.

Caveat- this exercise is an abstraction designed to demonstrate, in a general way, the impact that prices & fish allocations may have on enterprise profit.

Question #1 - 2007 Profit (average price change)

1. Using the Excel workbook (Tab "Change in Price 2007") - Calculate the 2007 profit.
   • Price increased by 22%
   • Bring forward the constant expense values from "Profit Analysis 2006" tab
   • Calculate the Labour Crew share (recall this expense category is variable - 31.1% of Gross Revenue)
2. What is the value of the Labour Crew share in 2007?
3. Was the average firm profitable in 2007 because of the price increase? Explain why or why not. What was the profit or loss $ value?

Question #2 - 2019 Profit (change in average price, allocation - expense inflation adjustment)

1. Using the Excel workbook (Tab "2019 Simulation") - Calculate the 2019 profit.
   • Price increased to $2.65
   • Average Allocation decreased to 239,484
   • Labour Crew share remains variable at 31.1% of Gross Revenue
   • Scale up constant average expense values as well as interest and depreciation by 24.5% (inflation) by multiplying 2006 values by 1.245
2. Was the average firm profitable in 2019? Explain why or why not. What was the profit or loss $ value?

Question #3 - 2019 Profit - allocation purchase expense

As a result of policy changes made in 2008 many fishing enterprises could acquire additional allocations via the "combining" policy. However, TAC reductions lowered their fishable amount even though they had higher individual quotes (allocations). Allocations that were purchased created a new constant (or fixed) expense (category) - allocation purchase expense (e.g., an annual loan payment to finance allocation purchase or other).

1. If the average enterprise allocation purchase expense were $100,000 what would be the firm's profit?
2. Revenue is a function of price and allocation. Based on your understanding from the course material, explain the level of control that a fisheries regulator may have each of these revenue variables.

Table to follow for info:

"Average Inc. " 213KL Crab Fleet 2006 $Price lave. price mutli-species enterprise] 0.83 Average Allocation [total lbs combined key species] 412,904 Gross Revenue $342,210.32 96 of to to! 96 of Expense - Operating 8: Maintenance ExpensesI 2006 {$1 Lave. expenses revenue 39.0% 31.1% Fuel, Grease, l[JIiI $58,461 21.0% Vessel Insurance $24,921 9.0% Vessel RepairsEI Maintenance $22,380 8.0% Bait $11,017 4.0% Food $6,053 2.0% Claimed Vehicle Expenses $5,959 2.0% Nets 3' Gear $4,889 2.0% Labour Hired Skipper $4,054 1.0% Vehicle Lease Expense $3,738 1.0% Fishing Licences Fees $3,456 1.0% Accounting Fees $3,291 1.0% On-Shore Facilities Maintenance $3,282 1.0% Professional 8 Administrative Fees $2,846 1.0% Dockside Monitoring $2,696 1.0% At Sea Observer COED; $2,123 1.0% Transport Canada Inspection $1,128 0.4% Other $9,385 3.4% Total Expenses $226,342 100% Gross Prot {Revenue - Expenses} $66,368.32 Depreciation $68,143 Interest Expense $23,785 Net Prots [$25,560]