Yoou decide to start your own Aircraft Charter Company much like this one http://247jets.com

You stumble on this site https://www.globalair.com/aircraft-for-sale/ where you buy your first aircraft. You are both nervous and excited about your new investment and you know if you do not start making a profit soon, your spouse will make you sell the aircraft. You give yourself one year to turn a profit, but first, you need to know how much sales you need to make that happen.

Using information from this blog https://blog.globalair.com/post/Measuring-the-Cost-of-Operating-an-Aircraft.aspx and making intelligent and educated assumptions when information is not specifically given, compute the following for your first year in business:

As sales are not given, Im estimating that total number of flights flown in the 1^st year would be 300 and each flight would cost $2000

Im also estimating that number of flights would be the cost driver

Target profit would be $150,000

Fixed/Variable costs are simply for illustrative purposes (to ensure that the concepts are understood; the actual prices are not likely realistic estimates nor are all fixed/variable costs accounted for)

I think I did the solution without accounting for number of passengers per flight; assume 1 person per flight (to compare to what I have as a solution to check if the computations are correct) and then 10 people per flight (Im not sure how that would impact any of the computations)

1- Determine your contribution margin in dollars and as a ratio

2 - Determine your breakeven point in units of your cost driver

3 - Determine your breakeven point in dollars

4 - Make some assumption that increases fixed cost (by $30,000), compute the new breakeven point

5- Make some assumption that increases variable cost (by $75,000), compute your new breakeven point

6 -Make some assumption concerning your target profit, determine what your sales should be to achieve your target profit

Variable Costs (yearly):

Engine Overhaul - $8,000

Fuel - $420,000

Snacks - $3,000

Landing & Parking Fees $5,000

Maintenance - Component Overhauls $2,000

Maintenance Labor $3,000

Maintenance Parts $2,500

Propellers Overhaul $1,500

Total = $450,000

Fixed Costs (yearly):

Aircraft Lease or Loan Payments (or Interest) $53,000

Aircraft Modernization/Upgrades $2,500

Aircraft Property Tax, Registration or User Fees $1,000

Computerized Maintenance Tracking $ 2,500

Hangar Rent/Lease $ 12,000

Insurance $5,000

Navigation Chart Service $1,500

Recurrent Training $2,500

Total = $45,000

SOLUTION I have come up with (work below) based on the above information and to answer the questions:

1- Determine your contribution margin in dollars and as a ratio $150,000 / 25 %

2- Determine your breakeven point in units of your cost driver 160

3- Determine your breakeven point in dollars $320,000

4- Make some assumption that increases fixed cost (by $30,000), compute the new breakeven point 220 units / $440,000

5- Make some assumption that increases variable cost (by $75,000), compute your new breakeven point 320 units / $640,000

6- Make some assumption concerning your target profit, determine what your sales should be to achieve your target profit $920,000

Fly The Friendly Skies Corporation
CVP Income Statement (Estimated)
For the Year Ending December 31st 2017
				Total	Per Unit
Sales (300 flights)				$ 600,000.00	$ 2,000.00
Variable Costs				$ 450,000.00	$ 1,500.00
Contribution Margin				$ 150,000.00	$ 500.00
Fixed Costs				$ 80,000.00
Net Income				$ 70,000.00
Contribution Margin Ratio	=	25.00%
Break-Even Point in Units (Flights)	160
Break-Even Point in Dollars	$ 320,000.00
Margin of Safety in Dollars	$ 280,000.00
Margin of Safety Ratio	46.67%
Sales dollars required to earn net income (target profit) of $150,000	$ 920,000.00
If Fixed Costs increased by $30,000 due to increases in costs for hanger rental ($25,000) and taxes/fees ($5000)
Break-Even Point in Units (Flights)	220
Break-Even Point in Dollars	$ 440,000.00
If Variable Costs increased by $75,000 due to increases in fuel ($55,000) and landing/parking fees ($20,000)
Break-Even Point in Units (Flights)	320			Revised Contribution Margin Ratio	12.50%
Break-Even Point in Dollars	$ 640,000.00