Business Finance Homework Help

Please read the case and answer question 1with break even analysis and 2 using profit analysis and the math work included! thank you let me know if there are any questions

Wellness Getaways, Inc. packages cruises to Caribbean
islands such as Martinique and the Bahamas. Like conventional cruises, the packages are designed to be fun.
But the cruise is structured to help participants become
healthier by breaking old habits, such as smoking or overeating. The Miami-based firm was conceived by Susan
Isom, 30, a self-styled innovator and entrepreneur. Prior
to this venture, she had spent several years in North
Carolina promoting a behavior-modification clinic.
Isom determined that many people were very concerned
about developing good health habits, yet they seemed unable
to break away from their old habits because of the pressures
of day-to-day living. She reasoned that they might have a
chance for much greater success in a pleasant and socially
supportive environment, where good health habits were fostered. Accordingly, she established Wellness Getaways, Inc.,
hired 10 consulting psychologists and health specialists to
develop a program, and chartered a ship.

Seven of Isom’s
business associates contributed an initial capital outlay totaling more than $600,000. Of this amount, $130,000 went for
the initial advertising budget, $20,000 for other administrative expenses, and $440,000 for the ship rental and crew.
Mary Porter, an overweight Denver schoolteacher, has
signed up to sail on a 10-day cruise to Nassau, departing
December 19. She and her shipmates will be paying an
average of $3,000 for the voyage. The most desirable
staterooms cost $4,400.
Mary learned of the cruise by reading the travel section of her Sunday newspaper on October 16.

On that
date, the Pittsford and LaRue Advertising Agency placed
promotional notices for the cruise in several major metropolitan newspapers. Mary was fascinated by the idea of
combining therapy sessions with swimming, movies, and
an elegant atmosphere.
Pittsford and LaRue account executive Carolyn Sukhan
originally estimated that 300 people would sign up for
the cruise after reading the October 16 ads. But as of
November 14, only 200 had done so. Isom faced an important decision.

“Here’s the situation as I see it,” explained a disturbed
Isom. “We’ve already paid out more than half a million
to get this cruise rolling. It’s going to cost us roughly
$400 per passenger for the 10-day cruise, mostly for
food. Pittsford and LaRue predicted that 300 people
would respond to the advertising campaign, but we’ve
only got 200.”
Isom continued, “I see three basic options: (1) we cancel the cruise and take our losses; (2) we run the cruise
with the 200 and a few more that will trickle in over the
next month; or (3) we shell out some more money on
advertising and hope that we can pull in more people.
“My preference is that we try to recruit more passengers.

There are simply too many empty rooms on that
ship. Each one costs us a bundle.”
At this point, Carolyn Sukhan said: “I’ve worked out
two possible advertising campaigns for the November 20
papers. The first, the limited campaign will cost $12,000.
I estimate that it will bring in 20 passengers. The more
ambitious campaign, which I personally recommend,
would cost $30,000. I believe this campaign will bring in
a minimum of 40 passengers.”
“I realize that our first attempt was somewhat disappointing.

But we’re dealing here with a new concept, and
a follow-up ad might work with many newspaper readers
who were curious and interested when they read our first
notice.”
“One thing is absolutely certain,” Sukhan emphasized.
“We must act immediately if there’s any hope of getting
more people on board. The deadline for the Sunday papers is in less than 48 hours. And if our ads don’t appear
by this weekend, you can forget it. No one signs up in
early December for a December 18 sailing date.”
Isom interrupted, shaking her head. “I just don’t know
what to say. I’ve looked over Carolyn’s proposals, and
they’re excellent. Absolutely first-rate. But our problem,
to be blunt, is money.

Our funds are tight, and our investors are already nervous. I get more calls each day asking
me where the 300 passengers are. It won’t be easy to
squeeze another $12,000 out of these people. And to ask
them for $30,000—well, I just don’t know how we’re
going to be able to justify it.”

Questions

1. What is the minimum number of passengers that
Wellness Getaways must sign up by November 20 to
break even with the cruise? (Show your calculations.)

2. Should Wellness Getaways go ahead with the
cruise, since 200 passengers have signed up as of
November 14?