BUS 5110 Managerial Accounting Unit 3 Written Assignment (WA)
Assignment Guide
BUS5110 Unit 3 Written Assignment
Question
Submit a paper which is 3-4 pages in length (no more than 4-pages), exclusive of the reference
page. The paper should be double spaced in Times New Roman (or its equivalent) font which is
no greater than 12 points in size. The paper should cite at least three sources in APA
format. One source can be your textbook.
In this paper, 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 the 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.
Page 1 of 5
, BUS 5110 Managerial Accounting Unit 3 Written Assignment (WA)
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.
Basic Concepts to Master
This assignment requires you to demonstrate your understanding of:
Contribution margins – how to calculate them and what they mean
Break-even quantities and break-even sales – how to calculate these values
Evaluate the results of cost-volume-profit analysis
Suggested Answer Guide
The paper should contain at least the following sections.
Title Page
o To comply with APA style, papers should have a title page. You can follow this
format for student papers:
Page 1
BUS 5110 Unit 3 Written Assignment:
CVP Analysis - Parasailing Company
Anonymous
University of the People
BUS 5110: Managerial Accounting
<Instructor Name>
Page 2 of 5
Assignment Guide
BUS5110 Unit 3 Written Assignment
Question
Submit a paper which is 3-4 pages in length (no more than 4-pages), exclusive of the reference
page. The paper should be double spaced in Times New Roman (or its equivalent) font which is
no greater than 12 points in size. The paper should cite at least three sources in APA
format. One source can be your textbook.
In this paper, 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 the 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.
Page 1 of 5
, BUS 5110 Managerial Accounting Unit 3 Written Assignment (WA)
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.
Basic Concepts to Master
This assignment requires you to demonstrate your understanding of:
Contribution margins – how to calculate them and what they mean
Break-even quantities and break-even sales – how to calculate these values
Evaluate the results of cost-volume-profit analysis
Suggested Answer Guide
The paper should contain at least the following sections.
Title Page
o To comply with APA style, papers should have a title page. You can follow this
format for student papers:
Page 1
BUS 5110 Unit 3 Written Assignment:
CVP Analysis - Parasailing Company
Anonymous
University of the People
BUS 5110: Managerial Accounting
<Instructor Name>
Page 2 of 5
