Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You work for Adelaide-based Tourperience Ltd whichprovide tourists and visitors with 'experiences' ofAdelaide and South Australia. Your manager is currently investigating introducing another product, which

You work for Adelaide-based Tourperience Ltd whichprovide tourists and visitors with 'experiences' ofAdelaide 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 theplan'sfeasibility. 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. 1)The Break-even point in trips per month (4 Marks)
  2. 2)The Break-even point in dollars of revenue per month (2 Marks)
  3. 3)Assuming a profit after tax requirement from the Helicopter trip business of $120,000 per year and a tax rate of 30%, calculate:
  4. a)Trips required per month to obtain target profit (4 Marks)
  5. 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 6Marks are allocated to ease of use and accuracy for 'what-if' analysis (which will also depend on the formulas used)

2 marks are allocated for the general presentation of the spreadsheet.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information Systems

Authors: Cynthia D Heagy, Constance M Lehmann

7th Edition

1111219516, 978-1111219512

More Books

Students also viewed these Accounting questions