Explore BrainMass
Share

# Constructing and Analyzing PETA's Profit and Loss Statement

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Hi,

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?

#### 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