W6_ANG_Student Pick-up Service #2

Problem Statement

Continue to my previous posting about Student Pick-Up Service that with the low level of service price, the rate of return of pessimistic scenario is still above the assumed MARR; now I want to know the Break Event Point (BEP) of customer/ passenger required of this business.

The assumption of this BEP calculation is made the same as previous posting, those are:

  • The student pick-up service price: IDR 500,000 per month
  • The pick-up service use Suzuki ‘Carry” year 1995 that price IDR 46,000,000 now.
  • 2 shift per day for morning and afternoon class
  • The pick-up only covers nearby my neighborhood, so the service price assumed the same no much different on the fuel consumption for the additional student/ passenger.
  • Projected for 2 years operation (24 months)
  • “All Risk” insurance car: 3% from purchased price.
  • Assumed the car will be sold at the end of investment the decreasing value is assumed IDR 2,000,000 per year (very conservative)

Feasible Alternatives

The feasible alternatives are simple; proceed with business if the number of BEP student/ passenger required is less than assumed in pessimistic scenario, meaning that the business risk is low, and decline it if it is not.

Outcomes/ Calculations of Each Alternative

Based on above assumption, I make calculation of BEP number of student/ passenger required as follows:


  • The compensation for the driver is split into two categories: basic as fix cost Incentive as variable cost.
  • The market salary for the private driver is about IDR 2,000,000 per month
  • Based on the simulation on previous posting that the total salary of driver in pessimistic scenario: IDR 1,300,000, most likely: IDR: 2,100,000 and optimistic: IDR 3,300,000; the scheme is quite interesting for the driver and encourage the driver to get and give good service to the customer/ student.

Setting Minimum/ Selection Criteria

Assumed the minimum BEP shall be not more than 3 customer/ student per shift.

Analysis/ Comparison of the Alternatives against the Criteria

As shown above, the BEP required to cover the fixed cost, the customer shall be on carried out on service per shift is minimum two student/ passenger and the criteria minimum is three as assumed in pessimistic scenario.

Selection of the Best/ Preferred Alternative Compared against the Criteria

Based on this assessment, the risk is relatively low because the minimum customer to have in order not losing money per pick-up service is low, two customers per shift, and it is under the number of customer assumed in pessimistic scenario, three students per shift.

Performance Monitoring and Post Evaluation of Result/ Follow up Assessment

The key point of why on this assessment the BEP is low, because I make the scheme of driver compensation, as biggest part of cost, is more on variable cost rather than on fixed cost.

By using this scheme, it will encourage more on the driver to get and keep customers and at the same time give less risk to business owner.

References :

  1. Sullivan, William G., Wick, Elin M., Koelling, C. Patric. (2012), Engineering Economy. 15th ed. Chapter 14: Decision Making Considering Mutiattributes, page 551-573, USA: Pearson Higher Education, Inc.
  2. Amos, Scott PE. (2012), Skill & Knowledge of Cost Engineering. 5th ed., USA: AACE International.
  3. Humphreys, Gary C. (2002), Project Management Using Earned Value. 2nd ed., USA: Humphreys & Associates, Inc.
  4. Bursa Kendaraan (2013). Carry Adiputro 1995. [ONLINE] Available at: http://kendaraan.trovit.co.id/. [Last Accessed 24 Sept 2013].
  5. Asuransi Mobil (2013). Tarif Premi Asuransi Kendaraan Bermotor. [ONLINE] Available at: http://mitraca.com/. [Last Accessed 24 Sept 2013].

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Filed under Anggono M, Week 06

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