1. QwikShare is a new not-for-profit organization that will rent low-emissions automobiles at QwikStops in suburban areas in order to provide an environmentally friendly transportation option to its customers. The organization plans to rent automobiles by the day only, and it will operate 7 days a week, 365 days per year.

On the first day of FY 2020, QwikShare will take out a pre-approved loan of $270,000.The loan will have an annual interest rate of 4%, with annual principal repayments of $30,000 per year to begin in FY 2021. Principal repayments and interest payments will be due the last day of each fiscal year. The organization will immediately use the loan to purchase its first fleet of 15 automobiles. Each automobile will be purchased for $18,000, will have a useful life of 8 years, and can be sold for $2,000 at the end of its useful life.

QwikShare will have a full-time staff that includes a Chief Executive Office, a Chief Financial Officer, an Operations Manager, two customer service agents, and two automotive technicians. Full-time staff salaries will total $540,000 in FY 2020, and health benefits will equate to 30% of full-time staff salaries. The organization will also employ 10 part-time staff members who will earn an average of $15.00 per hour in wages and will work an average of 20 hours per week. QwikShare will lease its office and QwikStop spaces for $10,500 per month, it will use $1,000 per month in water and electrical utilities, and it will use $1,750 in supplies per month. In addition, the organization will incur $750 per month per automobile in maintenance and insurance expenses, regardless of how many days a car is used each month. QwikShare will also cover the cost of fuel at a discounted rate; the organization anticipates that it will cost $25 per car per day that a car is rented. All expenses will be paid as resources are consumed, except supplies, for which the organization will pay with a two-month lag.

In the first month of FY 2020, QwikShare expects supporters will pledge a total of $925,000 in donations to help support its first year of operations. The donations will be received in the month in which they are pledged. QuikShare will charge $60 per day for an automobile rental, and rental fees are collected via pre-stored credit cards the moment customers enter the vehicles they have reserved. In addition, the organization will be supported by a new federal grant that will pay QwikShare $0.75 for every pound of carbon dioxide (CO₂) emissions its rentals prevent during FY 2020. QwikShare estimates that each of its low-emissions automobiles will prevent 50 pounds of CO₂ emissions per day they are in use during FY 2020. Revenues from the federal grant will be received with a one-month lag.

A. May you using break-even analysis, calculate the minimum number of automobiles QwikShare must rent per day in FY 2020 in order to break even?

B. May you using target profit analysis, calculate the minimum number of automobiles QwikShare must rent per day in FY 2020 in order to earn an annual profit of $96,725?

C. May you show me what an annual operating budget for FY 2020, assuming the organization will rent 12 cars per day, on average, in FY 2020 would look like?

D. May you show me a quarterly cash budget for FY 2020 (showing each of the four quarters and the annual total), assuming the organization will rent 12 cars per day, on average, in FY 2020, would look like? Since this is a new organization, the beginning cash balance should be $0.

Answer rating: 100% (QA)

A Breakeven analysis To calculate the minimum number of automobiles QwikShare must rent per day in FY 2020 to break even we need to consider the fixed costs and the contribution margin per automobile ... View the full answer