Luca Brazi owns a fishing boat charter business called "Sleeping With the Fishes." He runs charters 4 mornings per week, three weeks per month. Luca charges $300 per person for his charters. The boat can hold up to 12 passengers, but on average, he goes out each morning with eight passengers. Groups can charter the entire boat for $3,000. Luca bought the boat two years ago for $130,000. He expects to run charters on the boat for a total of ten years. His daughter has offered to buy the boat for $10,000 when he upgrades to a new one after ten years.

For each charter, Luca hires a crew of two at a rate of $150/day each. The boat uses approximately 80 gallons of gas for each tour. Luca currently pays $4.15/gallon at the marina. Luca feeds his crew and guests (including himself) a lunch that costs $12 per person. Because he often doesn't know how many passengers will be on a group tour, Luca purchases lunch for 12 passengers for group tours.

Luca carries insurance that costs $6,000/year. His business license costs $624/year, and the marina slip where he keeps his boat costs $2,000/month. Luca buys advertising space in various magazines for a total of $600 per quarter. Luca generally books three groups per month. All other charters include passengers who have booked individually.

QUESTION: Calculate the Monthly Cash Flow for Individually Booked and Group Booked Charters. Use whole numbers.

- Sales:
- Crew:
- Gas:
- Lunch:
- Total Variable Costs:
- Contribution Margin:
- Allocated Fixed Costs:
- Cash Flow:

Question

01-09-2024
Business

High School

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Luca Brazi owns a fishing boat charter business called "Sleeping With the Fishes." He runs charters 4 mornings per week, three weeks per month. Luca charges $300 per person for his charters. The boat can hold up to 12 passengers, but on average, he goes out each morning with eight passengers. Groups can charter the entire boat for $3,000. Luca bought the boat two years ago for $130,000. He expects to run charters on the boat for a total of ten years. His daughter has offered to buy the boat for $10,000 when he upgrades to a new one after ten years.

For each charter, Luca hires a crew of two at a rate of $150/day each. The boat uses approximately 80 gallons of gas for each tour. Luca currently pays $4.15/gallon at the marina. Luca feeds his crew and guests (including himself) a lunch that costs $12 per person. Because he often doesn't know how many passengers will be on a group tour, Luca purchases lunch for 12 passengers for group tours.

Luca carries insurance that costs $6,000/year. His business license costs $624/year, and the marina slip where he keeps his boat costs $2,000/month. Luca buys advertising space in various magazines for a total of $600 per quarter. Luca generally books three groups per month. All other charters include passengers who have booked individually.

QUESTION: Calculate the Monthly Cash Flow for Individually Booked and Group Booked Charters. Use whole numbers.

- Sales:
- Crew:
- Gas:
- Lunch:
- Total Variable Costs:
- Contribution Margin:
- Allocated Fixed Costs:
- Cash Flow:

Answer :

Final answer:

The monthly cash flow for individually booked charters is $7,760. The monthly cash flow for group booked charters is a loss of $17,008.

Explanation:

To calculate the monthly cash flow for individually booked and group booked charters, we need to calculate the sales, crew, gas, lunch, total variable costs, contribution margin, allocated fixed costs, and cash flow for each type of charter.

Individually Booked Charters:

Sales = (8 passengers * $300/person) * (4 mornings/week * 3 weeks/month) = $28,800/month

Crew = 2 crew members * $150/day * (4 mornings/week * 3 weeks/month) = $3,600/month

Gas = 80 gallons/tour * (4 mornings/week * 3 weeks/month) * $4.15/gallon = $3,168/month

Lunch = $12/person * (8 passengers * (4 mornings/week * 3 weeks/month)) = $11,520/month

Total Variable Costs = Crew + Gas + Lunch = $3,600 + $3,168 + $11,520 = $18,288/month

Contribution Margin = Sales - Total Variable Costs = $28,800 - $18,288 = $10,512/month

Allocated Fixed Costs:

Insurance: $6,000/year = $6,000/year / 12 months = $500/month
Business License: $624/year = $624/year / 12 months = $52/month
Marina Slip: $2,000/month
Advertising: $600/quarter = $600/3 months = $200/month

Total Allocated Fixed Costs = Insurance + Business License + Marina Slip + Advertising = $500 + $52 + $2,000 + $200 = $2,752/month

Cash Flow = Contribution Margin - Allocated Fixed Costs = $10,512 - $2,752 = $7,760/month

Group Booked Charters:

Sales = $3,000 * 3 groups/month = $9,000/month

Crew = 2 crew members * $150/day * (3 groups/month * 4 mornings/week) = $3,600/month

Gas = 80 gallons/tour * (3 groups/month * 4 mornings/week) * $4.15/gallon = $2,376/month

Lunch = $12/person * (12 passengers * (3 groups/month * 4 mornings/week)) = $17,280/month

Total Variable Costs = Crew + Gas + Lunch = $3,600 + $2,376 + $17,280 = $23,256/month

Contribution Margin = Sales - Total Variable Costs = $9,000 - $23,256 = -$14,256/month (loss)

Allocated Fixed Costs = Insurance + Business License + Marina Slip + Advertising = $2,752/month

Cash Flow = Contribution Margin - Allocated Fixed Costs = -$14,256 - $2,752 = -$17,008/month (loss)

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