Q-Constructions has tasked you to investigate the number of construction projects per year for which the company would need to break-even and make a profit of $500,000 per year. The average price of a building contract is $700,000 per project. The following are the fixed and variable costs of Q-Constructions in Table 2:

 

Description	Cost
Office Space	55,000
Professional Staff Salaries	205,000
Insurances	50,000
Machine Maintenance	80,000
Website Management	30,000
On-site workers’ salaries	$120,000 per project
Average Material Cost	60% of the project price per project

Table 2: Associated Costs of Q-Constructions

Use this information above to complete the requested analyses below.

 

A.  Calculate:

1. 
   
   • The break-even number of projects needed by the company. Answer - 3 projects 
   • The income made by the company at break-even. Answer - $2,100,000

Show all working out including the modelling and solution steps.

B. Q-Constructions is interested in making a profit per year to ensure the company has a positive financial outlook and new ventures can be done in the future. Calculate how many projects per year need to be completed to make a profit of $500,000 per year. Answer 6 projects

C. Q-Constructions workers’ have approached the building union and been informed they could be paid a higher salary and want their salaries to be determined based on a percentage of the project price. The company has reviewed their historical records on the number of projects per year and has made the decision to respect the workers’ demands and notice that the company would maintain a positive financial outlook if they set their break-even target at 4 projects per year. Determine the new salary percentage for the onsite workers’ on a project price based on the company’s average project price and associated costs in Table 2. 

D. Based on the new on-site workers’ cost per project from part (c), calculate the new number of projects that need to be completed to maintain a profit of $500,000 per year.

E. Due to the change in the on-site workers’ salaries, what is the effect on contribution margin in relation to the variable cost? Explain the effect of this change on the break-even number in part (a).

Hint! Your discussion should focus on the impact made by the contribution margin.  You can show the calculation of the contribution margin to support your discussion, but no other calculations should be used. 

F. In Excel, produce a break-even graph for Q-Constructions and include it here – you will also include a copy in the infographic where requested.

 use to break-even analysis formula to solve.