Travis is considering the start-up of a removals service in his hometown. He purchased aused second-hand truck for $24,000. He will need to hire a helper to assist with loading and unloading. After conferring with another operator of a similar service in another town of a similar size, Travis feels he can charge $80 per delivery and that each delivery will require an average round-trip driving distance of 30km. He has estimated the following expenses:

Truck insurance and registration $2,760 per year

Diesel $60 every 300km

General truck cleaning $20 every 1000 km

Helper's wages $2000 per month

Travis's wages $2500 per month

Tyres $750 every 75,000 km

Mobile Cost (on a 24-month contract) $70 per month

Other truck repairs and maintenance $500 per 10,000 km

Ignore all taxes and depreciation for the following questions.

(a) If Travis charges $80 per delivery, what is the break-even in deliveries per month?Find the break-even point algebraically and by using an EXCEL graph. Attach the printout or copy your EXCEL graph into your assignment submission.

EXCEL Instructions: Create a column called Number of Deliveries and in that column

enter values from 0 to 100 in increments of 10. Then create two more columns, one for Total Cost and another for Total Revenue. Enter appropriate formulae in EXCEL toobtain the total cost and total revenue corresponding to each value in the Number of Deliveries column. Highlight the resulting three sets of numbers and go to the Insert tab(or Chart menu) to obtain an appropriate diagram. Make sure that your graph has been labelled appropriately (i.e. title, axis labels, legend). Refer to Topic 3 in the EXCEL Supplement for further instructions on entering formulae and graphing in EXCEL.

(b) Travis is forecasting that he will make 85 deliveries per month. Based on your graph from part (a), will there be a net profit or net loss from the start-up at this volume of deliveries?How do you know? Calculate this net profit or loss amount.

(c) The industry standard recommends driver to make 75 deliveries per month as a start-upfor a sustainable business in long-run. At what unit price would Travis be just breaking even with the recommended number of deliveries per month?

(d) If the average distance per delivery turns out to be 25 km, how does this impact Travis?Assuming the fixed costs and the amount charged per delivery remains as in (a), explain in a short paragraph (4-5 sentences) whether the number of deliveries required to break even will increase or decrease. Do not re-calculate the break-even quantity, x, for this question however you may quote the break-even formula to aid your explanation.