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Storm Occurrence Services (SOS) provides services to secure houses and properties whenever major storms are forecast for an area. They do such things as fasten plywood over windows, install pumps and generators, trim and brace trees and so on. They keep an inventory of trailers, tools and supplies year round that incur annual maintenance and repair costs. Additional fuel and supplies are purchased locally at the time of storm preparation. Staff is "on-call" whenever the storms are forecasted.  Financial data is described below.

Revenue (Price) per storm $500,000 for all customers 

Maintenance and storage $440,000 Annual

Supplies per storm $200,000 for all customers

Labor costs per storm $250,000 for all customers

a) What would be the annual profit if there are 6 main storms in a year?

b) Determine the number storm per year are required to break even (comprise all costs)?

c) What would the revenue per storm have to be (rather than what is shown above) to achieve a profit of $1,000,000 if there are 10 storms in a year. 

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  • Category:- Accounting Basics
  • Reference No.:- M916328

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