CASE STUDY USING EXCEL SPREADSHEET

You work for a touring company Ltd which provide tourists and visitors with 'experiences' Australia. Your manager is currently investigating introducing another product, which are helicopter rides over the Valley. Each trip would be 50km in total.

Your manager wants you to use cost-volume-profit analysis in order to help assess the plan's feasibility. She provides you with the following estimated data:

Selling price per trip: $900 (total for 3 customers - trips only run with 3 customers)

Costs:

Fuel: $60 per trip

Barossa 'goodie bag' per customer: $20

Helicopter rental per month: $10000

Insurance per month (unlimited trips): $2,000

Pilot costs: $7,000 per month plus $100 per trip

Maintenance costs are difficult to estimate but data from a similar company in a different location shows that these monthly costs were $12,000 when 5,000 kms were flown and $6000 when 1,500 kms were flown.

REQUIRED: Calculate the following:

1) The Break-even point in trips per month

2) The Break-even point in dollars of revenue per month

3) Assuming a profit after tax requirement from the Helicopter trip business of $120,000 per year and a tax rate of 30%, calculate:

a) Trips required per month to obtain target profit

b) Revenue required per month to obtain target profit