Break Even Point Task

Excersise 1
Your friend’s grandfather wants to offer small-sized cruises during late spring-summer
season. He already has a boat but need to make some modifications to it including new eight
pillows (8 € each), six new lifejackets (40 € each), new paint update (1200 €) and other
cleaning and repair procedures which he thinks will end up costing around 120 €. For regular
monthly operations he estimates he will need an insurance (30 €), port fee for parking (70€),
maintenance (15€), shipping tax (42€), social security tax (45€). Each cruise he expects to
take with 6 passengers charging each with 45 € ticket (VAT included) and offering 2,5 hours
long cruise. After each cruise he expects to encounter relatively small costs of cleaning (7€)
and refueling (75€).
In Excel prepare a table which will count the Full and Monthly Break-Even Point (in number
of cruises (not tickets) with outlined Startup, Fixed and Variable costs. You can use class
example file as a draft.
Once you get the results answer a simple question: Do you think grandfather’s gamble is
worth it?

*Consider Monthly BEP to be without Startup costs and Full BEP with Startup costs.

Excersise 2
As leaves start falling your friend notices that the city has no caramel sugar apples to
offer to the citizens. He plans to start his business at December but has to calculate
the Break even to know if it‘s all worth it. He already calculated that the cost of
making one caramel apple will include the wooden stick (0,1 €), an apple (0,2 €),
sugar (0,1 €), caramel (0,2 €) and an electricity for heating (0,4 €) while he wants
to charge 3,5 € for it. He expects to buy a mixing&heating machine for 87€, a participant’s
permit for Christmas market for 15€ and a New Year’s one for 12€. He also expects he will
need a to order a sign for 57 €, buy a tent 600 €, and an electric generator for 149 €. How
many apples he will have to sell to break even? Which amount it would account for in sales
(€)?
*Calculate only Full BEP=> how many apples should be sold not to have any loses from
doing it and how much that would be in sales.

Excersise 3
When you started showing your city to tourists (as a guide) a year ago you didn‘t expect to
have such a high demand. Now, you want to expand your trips to all over ..... (your country).
For that, you want to buy a used minivan (8700€), check it’s condition (68€), do some repair
works and cleaning (870€), buy a 1-year insurance (37€) and paint it with company’s colors
(1400€). You’ll also need to pay a registration fee for CO2 pollution for your vehicle (which
is Benzin-fueled, 148 g/km van). Find the one-time fee amount here:
https://eregitra.lt/viesa/registracijos-mokestis/
Once that done, you’ll need to print out leaflets (110€) to negotiate with existing
hotels/AirBnB’s on potential partnership (cross-promotion) and other promo-material for
your tourist-customers (45€). In order to satisfy both city-viewing customers and trip-lowers
you hire your friend to help out. Since it’s a part-time job with small number of hours his
salary is only 370€. Yet, the social security tax has to be paid which is 11,27% of his salary.
The insurance, internet, stationary and other monthly fixed costs are 27€.
As you’ve decided the price of one tour will be 180 € for a 4-hour long trip with the guide.
This price is for a tour for groups up to 6 people (your van’s max. capacity). During one
average tour following variable costs are present: fuel (67 €), cleaning (10€), x3 bottles of
water (1,5€ each), paid road fee (11€).
 How many tours do you have to sell monthly not to have any losses? (BEP Monthly)
 How many tours should be sold in general not to have any losses at all (including the
start-up costs of buying the van etc.)