Math Is Fun Forum

mariasmiles25

Member

Registered: 2009-02-07

Posts: 2

Need to create Break Even formula

I need some help writing a math formula for accounting. I need to write a formula which shows how many tickets for a tour need to be sold for a company to break even and put it into MS Excel.  I know that BE point =fixed+variable+profit, what I am having trouble is with the kind of product being sold, as it is not like a regular item with a fixed cost (buy a shoe at cost for $2 and sell if for $4 kind of thing) you would sell.  The tickets are for a bus tour, so you can have 5 customers per tour, 3 tours per hour, and you have to take into account gas and maintenance of the bus.

Given Information
Fixed:
Rent: $1000 per month
Insurance: $200 per month
Employee Salary: $2000 per month

Variable:
Employee rate (only one hourly employee): $10 per hour
Fuel consumption: 15 gal/hour
Fuel price: $3.00 per gallon
Average maintenance for bus: $50 per hour

Price charged to customer: $100 per ticket
Average amount of customers per tour: 5
Average tours per hour: 3

Any help would be appreciated. Thanks

George,Y

Member

Registered: 2006-03-12

Posts: 1,379

Re: Need to create Break Even formula

So you just charge $1500 per hour? That's your steady income?
I think your variable cost is linked either to operation hours or how many buses you have. Making this distinction would help clarify your case.

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X'(y-Xβ)=0

mariasmiles25

Member

Registered: 2009-02-07

Posts: 2

Re: Need to create Break Even formula

There is only one bus.

The customer pays $100 for a ticket
5 customers can be on the bus at one time
3 tours can happen in one hour

George,Y

Member

Registered: 2006-03-12

Posts: 1,379

Re: Need to create Break Even formula

Fixed Cost:
(1000+200+2000)/25days = 128 per day
Variable Cost: 
10+15*3+50=105 per hour
Variable Income: (under full operation)
1500 per hour

So even you operate one hour a day, you still have a lot to earn.
I think a more realistic assumption is the occupancy level, that is how empty your bus is can break you down.

There is no decision to be made when your bus is full, there is decision to be made when it is half empty, and you need to decide whether to run it or not. (When is pure empty you lose money)

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X'(y-Xβ)=0