The objective of this simulation is to investigate the consequences on the break-even point, margin of safety and profit when there is a change in the revenue or cost conditions of the firm.

The input variables include price, quantity, as well as fixed and variable cost components.

The simulation is based on a deep sea specialist haulage company that works in the oil exploration sector.

The maximum number of contracted miles that the firm can provide per year is 100000. Due to other commitments the minimum number of miles is 80000.

The costs are divided into fixed and variable. Available ranges for the input parameters are listed below;

The Fixed Costs

• Office Staff Salaries
• Operatives Staff Salaries
• Ship Maintenance
• Office Equipment
• Office Rates & Rent
• Insurance per Operative

The Variable Costs

• Fuel
• Sensitivity to Fuel Price
• Operatives Bonus
• Office Running Costs

We use models in an attempt to explain or predict outcomes.

A model simplifies the relationship between various economic factors. This simplification of the complex interactions between individuals, groups and institutions relies on the ceteris paribus assumption. In other words, other things being equal or unchanged.

This business simulation allows the individual to simulate the consequences of internal and external changes on the profitability of the firm and the break-even point.

You can download an Excel version of the original spreadsheet (Excel 97).

The model settings for the inputs are;

• World income: stable, increase, decrease
• Income tax: stable, increase, decrease
• Advertising budget: stable, increase, decrease
• Corporation tax: stable, increase, decrease
• Harvest conditions (coffee): stable, good, poor
• PED of Coffee: -0 to -2.1
• PES of Coffee: -0 to -2.1
• PED of Milk: -0 to -2.1
• PES of Milk: -0 to -2.1
• PED of Tea: -0 to -2.1
• PES of Tea: -0 to -2.1
• CPED Milk & Coffee: -0 to -2.2
• CPED of Tea & Coffee: -0 to -2.1
• AED of Coffee: -0 to -2.1

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