Omar and his three college friends, William, Sara and Robert, were considering going into the student painting business during the summer before the start of their final year at college. They had heard that these were great opportunities to make a lot of money.

Their research determined that:

1. They would require an initial investment of $4,000 for equipment
2. The average price for a standard painting job was $1,500
3. They estimated that the labour cost per job was $500.
4. The average cost of materials required to complete a standard painting job was around $500.
5. The Franchisor’s royalty fee was 20% of sales.
6. Omar and each of his friends were hoping to make around $3,000 each through their venture over the four months they planned to run the business.

Question #1

Using the data shown above, prepare a Break-even analysis to determine how many homes Omar and his friends will need to paint during the four (4) months they plan to be in business in order to breakeven. Show your calculations.

Question #2

Omar and his friends plan to be in business for the 16 weeks of the upcoming summer. They estimate that it will take a team of two (2) students one (1) week each to complete one house painting job. Based on your calculation of the break-even point in units, comment on the viability of Omar’s business idea. Show your calculations.

Answer rating: 100% (QA)

Since the initial investment of 4000 would continue to be incurred I am assuming that would be the o... View the full answer