Question
You work for Adelaide-based Tourperience Ltd which provide tourists and visitors with 'experiences' of Adelaide and South Australia. Your manager is currently investigating introducing another
You work for Adelaide-based Tourperience Ltd which provide tourists and visitors with 'experiences' of
Adelaide and South Australia. Your manager is currently investigating introducing another product, which
are 'De-luxe' helicopter rides over the Barossa Valley. Each trip would be 50km in total.
Your manager wants you to use cost-volume-profit analysis in order to help assess the plan's feasibility.
She provides you with the following estimated data:
Selling price per trip: $600 (total for 3 customers - trips only run with 3 customers)
Costs:
Fuel: $50 per trip
Barossa 'goodie bag' per customer: $40
Helicopter rental per month: $20,000
Insurance per month (unlimited trips): $1,000
Pilot costs: $5,000 per month plus $100 per trip
Maintenance costs are difficult to estimate but data from a similar company in a different location shows
that these monthly costs were $11,000 when 5,000 kms were flown and $5000 when 1,500 kms were
flown
REQUIRED: Calculate the following:
1) The Break-even point in trips per month (4 Marks)
2) The Break-even point in dollars of revenue per month (2 Marks)
3) Assuming a profit after tax requirement from the Helicopter trip business of $120,000 per year
and a tax rate of 30%, calculate:
a) Trips required per month to obtain target profit (4 Marks)
b) Revenue required per month to obtain target profit (2 Marks)
Your manager has requested that the spreadsheet is easy to use for 'What-if' analysis - so she would like to
be able to change some of the inputs to see the impact on the calculations above - for example, if the
Helicopter were able to be rented more cheaply or the selling price was increased.
Hence 6 Marks are allocated to ease of use and accuracy for 'what-if' analysis (which will also depend on the
formulas used)
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