Please discuss the following case study. In doing so, explain your approach to the problem, support...

Question

Please discuss the following case study. In doing so, explain your approach to the problem, support your approach with references, and execute your approach. Provide an answer to the case study’s question with a recommendation.

You are the owner of a parasailing company that is expanding operations to a new beachfront location, and you need to prepare a 3-year analysis for the bank that may loan you the funds to purchase your boat and parasailing equipment.A lot of business is done on a referral basis, where a company pays a fee to a 3rd party to send them customers. However, because of your well-established reputation, you already have received requests for “flights” to be scheduled as soon as you open the new location. Therefore, you expect to break-even the first year but must calculate the number of flights needed. You also need to determine the new break-even point in Year 2 if the location allows referrals, which you believe will cost on average about 2% of the sales price overall. Finally, you need to determine the volume needed to have $10,000 in profit in Year 3. The following information is available:

Sales price per flight $175
Estimated loan payment per month $350
Fuel costs per flight $100
Full-time scheduler salary $2,500 per month
Boat crew per flight $30
$500 per month dock fee and use of a small office on a pier

Requirements:

Calculate the Year 1 break-even quantity, contribution margin, and contribution margin ratio. Explain how the values were determined.
Calculate the Year 2 break-even quantity, break-even sales, and contribution margin ratio. Explain how the values were determined.
Determine the number of flights (units) needed to retain a profit of $10,000 in Year 3, assuming the company does allow for referrals.
Recommend if the bank should issue the loan.

Superior papers will:

Perform all calculations correctly.
Articulate the approach to solving the problem.
Explain the relationship of the costs to the concept of contribution margin.
Discuss any limitations of the data, including what may be missing.
Conclude on whether the bank should issue the loan.

Sarabjeet · Accepted Answer

A Case Study On The Contribution Margin And Ratio Of A Parasailing Company 
2
Abstract
This article is about a case study of a parasailing business that is enhancing its business to a new waterfront location. The company needs to formulate a 3-year analysis for the bank, which might lend the company funds to buy boats and parachutes equipment.
This article also attempts to determine the following;
· The number of flights needed to achieve break-even in the first year.
· If the site allows 2% of the recommended total sales price, it is the new break-even point for the second year.
· The number of flights or the number of flights required to make a revenue of USD 10,000 in the third year.
· Recommend loans to banks to purchase boats and parasailing equipment.
Contents
1.	Abstract	2
2.	Introduction	3
3.	To calculate the number of flights for the business to break even in year 1.	4
4.	Year 2 Break-Even Quantity, Break-Even Sales, And Contribution Margin Ratio.	4
5.	The number of flights (units) required to retain a revenue of $10,000 in Year 3, assuming the business does enable for referrals	5
6.	Recommendation To the Bank in Respect of The Loan for The Purchase of Boat	6
7.	References	7
Introduction
According to Walther & Skousen (2009), The involvement margin is revenue minus variable expenses” (page 50). In addition, it’s a conceptual figure that reproduces the amount accessible for each sale, after removing every variable expense related with the unit sold” (page 50).

Please discuss the following case study. In doing so, explain your approach to the problem, support your approach with references, and execute your approach. Provide an answer to the case study’s...

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