Depreciation on the facilities $6,000 per year. Real estate taxes $4,200 per year. Utilities average $300 per month. General track and facility maintenance averages $200 per month. Chuck’s son is employed to operate and maintain the facilities at an annual salary of $36,000.
Engineering students from Monterrey Peninsula College work as interns. One engineering student can be assigned to as many as 6 pitstop workstations to trouble shoot and provide ideas regarding sprocket ratios, engine issues, track temperature/tire pressure, etc. As an intern, they are paid $25 per work station -- per day.
Required:
(a) Determine the number of pitstop work station rentals and revenue Chuck needs to break even using the contribution margin technique.
(b) If the current level of pitstop workstation rentals is 2,320 per year, by what percentage can workstation rentals decrease before Chuck should be concerned about having a net loss?