Your organization is going to respond to a request-for-proposals (RFP) to provide a high security courier service to a law firm with four offices located in Tampa, Jacksonville, Orlando, and West Palm Beach. Explain how you could use breakeven analysis to determine your bid amount on the proposal. Use the Profit Model to demonstrate your response. Ensure you include a well considered discussion of the revenue and expenses. In all discussion questions responses ensure that you correctly reference scholarly sources you used in researching and analyzing your response. Also, use appropriate APA formatting methods.

There is a checklist provided at the bottom of the DQ posting in the forum. The items in the checklist can be discussed/arranged around the following main parts: I. Ground Rules and Assumptions II. Complete Listing of Fixed Costs and Variables Costs If your breakeven units of measurement is "miles," then all of the variable costs must be expressed as $dollars per mile. III. Explanation of Revenue If your breakeven units of measurement is "miles," then the Revenue must be expressed as $dollars per mile. IV. Explanation of Return on Investment Strategy In business we always have to have a clear strategy on how our firm is going to make money. You need to discuss the profit percentage you wish to make on your fixed cost investment. This allows you to calculate how many units beyond BEP that you have to achieve to make the investment worth it. V. Scholarly Resources Please see the next attachment for some more food for thought. This worksheet is offered to provide some assistance in preparing your DQ posting. Tampa Jacksonville Orlando West Palm Beach Tampa NA 200 85 205 Jacksonville 200 NA 141 285 Orlando 85 141 NA 171 132 West Palm Beach 205 285 171 NA AVG 163 209 132 220 Round Trip 327 417 265 441 Orlando is centrally located, so that would be one way to determine the best spot for a HUB. Or, you might select another city because it has more population and opportunities related to your existing client base. .....be creative....:-) Please be creative and use this DQ as an opportunity to practicing thinking through a good list of fixed and . variable costs This is good practice for your own :-)business endeavors INTERESTING EXAMPLES http://www.money-zine.com/Calculators/Auto-Loan-Calculators/Hybrid-Car-Calculator/ http://library.thinkquest.org/4116/Trip_Planning/car.htm http://www.missouribusiness.net/sbtdc/docs/evalbus.pdf http://www.dehchobdc.ca/Main/Resources/Training/Bidding%20on%20Contracts.pdf What is your breakeven unit of measurement? Your breakeven unit of measurement will typically be miles or trips(packages). However, other units are possible. If my breakeven unit is "miles," then variable costs and revenues must be expressed using a "per mile" rate. However, your breakeven unit of measurement cannot be dollars. Some Fixed Cost Considerations Vehicles - lease or purchase? Office Space - lease or purchase? Drivers - fixed salary cost or variable pay by the mile? Uniform cost for each driver Insurance cost for drivers and vehicles Telephone/Office staff ...Please develop your own list, don't just copy this one. :-) Some Variable Cost Considerations (Example using Miles as the Breakeven Quantity) Gasoline - per mile (Based on vehicle "miles/gallon" rating and average gasoline cost per gallon) If a vehicle gets 25 miles per gallon and gas costs $4 per gallon, then our variable cost per mile is ($4/25) = $0.16 per mile Oil Changes - per mile If an oil change costs $50 and it occurs every 8,000 miles, then our variable cost per mile is ($50/8,000) = $0.00625 per mile Tire wear - per mile .. And so on.. Once we calculate all of our individual variable costs, we would total them to develop our total variable cost per mile. Other maintenance - estimated at a per mile rate If an oil change costs $50, and one is performed every 3,000 miles, then the variable cost is $50/3000 = $0.017 per mile Once you know the variable costs per mile...then you can calculate the average trip or package cost based on an average trip from Orlando. After you calculate your "costs," then you can calculate how much you are going to charge per trip/package, and this will become your "Revenue" amount, i.e., the amount you charge per delivery. Profit = (Revenue per unit) X - Fixed Costs - (Variable cost per unit)X Where X is the breakeven quantity At the breakeven point, Profit=0. If our breakeven units of measurement is "miles," then all of the variable costs must be expressed as $dollars per mile. Profit = (Revenue per mile)X miles - Fixed Costs(dollars only, as fixed cost does not change as the breakeven unit of measurement changes) - (Variable cost per mile) Xmiles If our breakeven unit of measurement is "packages," then all of the variable costs must be expressed in units of measurement of $dollars per package. Profit = (Revenue per package)X packages - Fixed Costs(dollars only, as fixed cost does not change as the breakeven unit of measurement changes) - (Variable cost per package) Xpackages What kind of profit do I want to achieve? If I invest a certain amount of money in a business, then I want to make some rate of return that makes it worthwhile. A business typically has to achieve more than the breakeven point to achieve a reasonable profit. Let' s pretend we calculated our total fixed cost to be $25,000 Let's also pretend that our total variable cost per mile is $2.25 Let's also pretend that we charge $5.00 per mile Our BEP would then be... Profit = (Revenue per unit) X - Fixed Costs - (Variable cost per unit)X Profit = ($5) X - $25,000 - ($2.25)X At BEP Profit =0 0 = ($5) X - $25,000 - ($2.25)X 2.75 $25,000= ($2.75)X 25,000/2.75= X 9,090.9 =X 9,090.9 Miles Hence, we would need to be paid for 9,090.9 miles to breakeven If we want to make %20 Return on the Fixed Costs, then we would need to generate 20% ($25,000) = $5000 Profit = ($5) X - $25,000 - ($2.25)X $5,000 = ($5) X - $25,000 - ($2.25)X $30,000= ($2.75)X 30,000/2.75= X 10,909.1 =X 10,909.1 Miles