Question

Analyze the Sales Budget your team has created. Based on the projected revenue numbers within the quarterly data given, determine approximately how many new airplanes will be needed to generate the necessary revenue on an annualized basis. The industry uses Passenger Seat Miles as a measure of revenue. Current data fm the industry shows revenue per Passenger Seat Mile is 16 cents. ExpressJet believes that their revenue will go up by one cent per month during the quarter. An average plane flies 52,500,000 miles a year and will last 30 years. Complete a 2 to 3 page memo to the management of ExpressJet explaining your analysis of their asset needs.

		ExpressJet Sales Budget
SALES BUDGET:
			October	November	December	Quarter
Miles flown by fleet			218,750,000	218,750,000	218,750,000	656,250,000
Revenue per seat mile			$0.16	$0.17	$0.18	$0.17
Total sales			$35,000,000	$37,187,500	$39,375,000	$111,562,500
Total Miles per quarter			656,250,000
Average miles per quarter			13,125,000		Average useage per year		52,500,000
TOTAL PLANES NEEDED			50		Average useage per month		4,375,000

Answer 1

To : ExpressJet

From : Chief Analyst

Subject : Sales Budget and Analysis of Assets Needed

Date : 31/12/200X

Our team has successfully prepared the sales budget for the year 200X. And analysed the requirement of planes to achieve forecasted sales. For achieving the conclusion we have considered the quarterly data given. the revenue per passenger mile, the sales growth rate, average miles plan flies per year.

We have considered the following facts -

• Together Planes flies 218,750,000 miles per month, So 656,250,000 miles per quarter.

• The revenue per seat mile increases at a rate of 1 cent per month. i.e. starting from 0.16 in October

0.17 in November and 0.18 in December. Which will result in 0.17 Average rate.

• Average usage of one plane per year is 52,500,000 miles, So 13,125,000 miles per quarter.

Analysis of planes needed - Considering the miles of ExpressJet per quarter and the average miles a single plane can fly in the quarter we can come to the number of planes needed for the quarter, same number of planes will be needed for the year since the plane carries the life of 30 years.

Number of planes needed = Total miles per quarter / Average miles per quarter per plane

50 planes = 656,250,000 / 13,125,000

Estimated Revenue for the Year - The average miles flown by fleet bieng constant and considering the constant growth in the revenue per seat mile every month i.e. one cent per month. We calculated the estimated sales for the next year.

MONTH	RATE	REVENUE
January	0.19	41,562,500
February	0.20	43,750,000
March	0.21	45,937,500
April	0.22	48,125,000
May	0.23	50,312,500
June	0.24	52,500,000
July	0.25	54,687,500
August	0.26	56,875,000
September	0.27	59,062,500
October	0.28	61,250,000
November	0.29	63,437,500
December	0.30	65,625,000
TOTAL		643,125,000

Miles Flown by fleet per month 218,750,000 miles per month being multiplied to per month rate.

Please find the report attached.

Chief Analyst.