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    Constructing and Analyzing PETA's Profit and Loss Statement

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    Hi,
    Please help with the following questions.

    Pet Energy Therapy Association (PETA) treats peoples' pets, and has the following cost structure:
    Charge per therapy session $150
    Variable cost per therapy session $ 50
    Fixed costs $200,000

    They expect to perform 2,000 session each year (8/day, 5 days/week, 50 weeks/year).

    A. Construct PETA's profit and loss statement.

    B. How many sessions must PETA's perform to breakeven?

    C. To earn $100,000 in profit, how many sessions must they provide this year?

    D. If there is one fulltime employee, paid $40/hour, who spends an hour on each session, what work would be needed to earn the $100,000?

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    Solution Preview

    1. Pet Energy Therapy Association (PETA) treats peoples' pets, and has the following cost structure:
    Charge per therapy session $150
    Variable cost per therapy session $ 50
    Fixed costs $200,000

    They expect to perform 2,000 session each year (8/day, 5 days/week, 50 weeks/year).

    A. Construct PETA's profit and loss statement.
    Service revenues $300,000 ($150/session*2,000 sessions/year)
    Variable costs 100,000 ($50/session*2,000 ...

    Solution Summary

    This solution illustrates how to construct an income statement, determine a break-even point, and determine the sales volume to reach a target profit.

    $2.19

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