Jordan is developing a business plan for a residential building inspection service he wants to start up. Rent and utilities for an office would cost $1000 per month. The fixed costs for a vehicle would be $450 per month. He estimates that the variable office costs (word processing and supplies) will be $50 per inspection and variable vehicle costs will be $25 per inspection. Jordan would also spend $200 per month to lease a computer, and $350 per month for advertising.
a. If he charges $275 per inspection, how many inspections per month are required before he can “pay himself?”
b. How many inspections per month are required for Jordan to be able to draw a salary of $4000 per month?
Use the graphical approach to CVP analysis to solve the problem.