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# Case 2 Week 3 Essay

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Case Study 2
Springfield Express

7/29/2012
Managerial Accounting

Case Study 2

Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available:

Number of seats per passenger train car                                             90
Average load factor (percentage of seats filled)                               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?
CM = \$160-\$70=\$90 per passenger
CM ratio = 90/160=56.25
3150000 / 90 = 35 passengers
3150000 / 0.5625 = 5,600,000

b. What is the break-even point in number of passenger train cars per month?

(Average Passenger per Car) 90 x .70= 63
(Break Even in Train Cars) 35,000/63= 556

c. If Springfield Express raises its average passenger fare to \$ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger cars?

(Break Even in passengers) 3,150,000/ (190-70) = 26250
(Average Passengers per Car) 90 x .60= 54
(Break Even In Train Cars) 26250/54= 486

d. (Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by \$ 20 per barrel, it is estimated that variable cost per passenger will rise to \$ 90. What will be the new break-even point in passengers and in number of passenger train cars?

(Break even in passengers) 3,150,000 / (170-90) = 39,375
(Average Passengers per Car) 90 x .70= 63
(Break Even in train Cars) 39,375/63= 625

e. Springfield Express has experienced an increase in variable cost per passenger to \$ 85 and an increase in total...

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