Question

This case (Just Us! Community-Based Tourism) provides you with an opportunity to perform a simple triple bottom line analysis within the context of fair trade and community-based tourism. The issues in the case include high stakeholder expectations, low budgets and financial resources, and pressures faced by social venture companies.

LINk:https://hbr.org/product/just-us-community-based-tourism/W10012-PDF-ENG

After reading the case, prepare a 2-4 page written team response to answer the following questions:

1. How does community-based tourism (CBT) help JUDES meet its mission?

2. Prepare an analysis of the CBT trip using a triple bottom line (TBL) analysis. The table analyses are included as appendices.

a. Separate the 8 JUDES ethical consumer principles into TBL format, i.e., economic, social, and environment. Provide a written justification for your judgments.

b. Separate the JUDES CBT guidelines into TBL format. Provide a written justification for your judgments.

c. Divide expenses into four categories – social, environment, economic, and necessary. Necessary expenses are those that must be incurred, regardless of TBL objectives. Necessary expenses are noted by an X; social, environment, and economic expenses are designated by a + (positive impact) or – (negative impact). Provide a written justification for your judgments.

3. Evaluate how well the TBL objectives have been built into the budget.

4. How has the amount of money spent/effort on the CBT supported the guidelines related to TBL concerns (i.e., social, economic and environmental)? Identify assumptions relevant to your judgment.

5.At what trip fee and participant level does JUDES break even on the trips? (Prepare a break-even analysis.)T

Answer 1

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Break-even analysis is often called a Cost-Volume-Profit Analysis. A break-even point which is also called the operating break even point is the output level at which total revenues and total costs are equal. At break even operating income is zero. Above the break even point there is an operating income, and below the point there is an operating loss.

Determining break-even point is a key part of CVP analysis and assessing how various what-if decision alternatives will affect operating income. The break-even point may be determined using there different methods, such as, an equation method, a contribution margin method and a graph method.

Equation method:

Revenues – Variable costs – Fixed costs = Operating income

Or

(USP x Q) – (UVC x Q) – FC = OI

Where, USP = unit selling price

Q = quantity sold to break even

UVC = unit variable price

FC = fixed costs

OI = operating income

Contribution margin method:

The contribution margin method is an algebraic adaptation of the equation method. This represents the amount remaining from sales revenue after variable expenses are deducted. It is found by taking revenues and subtracting all costs of the output that vary with respect to the number of output units.

(USP x Q) – (UVC x Q) – FC = OI

(USP – UVC) x Q = FC + OI

UCM x Q = FC + OI

Q = (FC + OI) / UCM

Where, USP = unit selling price

Q = quantity sold to break even

UVC = unit variable price

FC = fixed costs

OI = operating income

UCM = unit contribution margin (USP – UVC)

Graphical method:

A CVP graph or break even chart shows the interrelationships among cost, volume and profit graphically.

• The activity level (unit volume) is shown on the horizontal (X) axis
• Dollars are shown on the vertical (Y) axis
• Total costs and total revenues are both plotted as lines with their point of intersection being the break-even point