Tippalee Ventures Inc provides helicopter tours of the wilde

Tippalee Ventures Inc. provides helicopter tours of the wilderness. The fixed monthly cost for the helicopter, gear, and airport space is $42,500. The variable cost per tour is $6,500. The helicopter tours sell for $3,500 per person, and the helicopter seats three customers. Assuming every helicopter is filled to capacity, what is the break-even volume for the company? What is the break-even volume if each helicopter only carries two customers? Please provide steps and calculations.

Solution

Break even point = Fixed Costs / Contribution per unit

Present

Fixed Costs = $ 42,500

Contribution = Sales - Variable costs

= $ 3,500 x 3 - $ 6,500

= $ 4,000

Break even point = $42,500 / $ 4,000

= 10.625 or 11 customers (since people cannlot be in fraction)

New Assumption of 2 customers per trip

Contribution = $ 3,500 x 2 - $ 6,500

= $ 500

Break even point = $42,500 / $ 500

= 85 customers.