Submitted By mrsBelle
Words 277
Pages 2
Number of seats 90 average load factor 70%
Average full passenger fare \$160
Average variable cost per passenger \$70
Fixed operating cost per month \$3,150,000

A) what is the break-even point in passengers and revenues per month? Passengers 35,000 and the Revenue is \$5,600,000
B) What is the break-even point in number of passenger train cars per month? Passenger train cars are 556.
C) If Springfield Express raises it average passenger fare to \$190, it is estimated that the average load factor will decrease to 60%. What will be the monthly break-even point in number of passenger cars? Passenger train cars would be 648
D)

Calculations contribution margin per passenger =passenger fare \$160 - variable cost per passenger \$70 \$90
Contribution margin per unit is the difference between the selling price per unit and the variable cost per unit. Breaking -even point in units (tickets sold) = Fixed costs \$3,150,000 / Contribution margin per unit \$90 35,000. Break-even point in dollars = Fixed costs \$3,150,000 / Contribution margin ratio .5625 \$5,600,000. Contribution margin ratio = unit contribution margin \$90/ unit selling price \$160 0.5625. Contribution margin ratio is the portion of a unit's selling price that exceeds total unit variable cost.

Average number of passengers per car = seats 90 x average seats filled (load factor) 70% 63
Number of cars needed to transport passengers per month = total passengers 35000/number of passengers per car 63 556

Contribution margin per passenger = passenger fare \$190 - variable cost per passenger \$70 120 break-even point in units = Fixed costs \$3,150,000 / Contribution margin per unit \$120...

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