727 Words3 Pages

ACCT505
Case Study 1 Week 3
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 number of Passengers per trip 63
Average full passenger fare $ 160
Average variable cost per passenger $ 70
Fixed operating cost per month $3,150,000
Formula :
Revenue = Units Sold * Unit price
Contribution Margin = Revenue – All Variable Cost
Contribution Margin Ratio = Contribution Margin/Selling Price
Break Even Points in Units = (Total Fixed Costs + Target Profit )/Contribution Margin
Break Even Points in Sales = (Total Fixed Costs + Target Profit )/Contribution Margin Ratio
Margin of Safety = Revenue - Break Even Points in Sales
Degree of Operating Leverage = Contribution Margin/Net Income
Net Income = Revenue – Total Variable Cost – Total Fixed Cost
Unit Product Cost using Absorption Cost = (Total Variable Cost + Total Fixed Cost)/# of units
a. The Contribution margin per passenger = $160-$70=$90
Contribution margin ratio = $160-$90=56.25%
The Break-even point for passengers per month = $3,150,000/$90= 35,000 Passengers
The Break-even point in dollars per month = $3,150,000/56.25% = $56,000
b. The number of seats per train car based on average load is 90 x 0.70 = 63.
The break-even point in number of passenger train cars per month = 35,000/63= 555.55 or 556 train cars
c. Contribution margin =$190-70=$120
Break-even point in passengers = 3,150,000/ $120= 26,250 Passengers The number of seats per train car based on

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