Reference no: EM132655111

You work for Theo Walcott Tours Ltd which provide tourists and visitors with 'experiences' of Perth and its surrounds. Your manager is currently investigating introducing another product, which are 'Luxury' helicopter rides over beautiful bushland. 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: $600 (total for 3 customers - trips only run with 3 customers)

Costs:

Fuel: $50 per trip
Walcott 'goodie bag' per customer: $40
Helicopter rental per month: $20,000
Insurance per month (unlimited trips): $1,000
Pilot costs: $5,000 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 $11,000 when 5,000 kms were flown and $5000 when 1,500 kms were flown.

Required:

Question 1) The Break-even point in trips per month

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

Question 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.