Case Study 2
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...