713 Words3 Pages

Case Study 1 a) What is the break-even point in passengers and revenues per month?
Contribution margin per passenger = $ 160- $ 70 = $ 90 per passenger
Contribution margin ratio = $ 90/$160 = 56.25%
Passengers = $3,150,000/$ 90 per passenger = 35,000 passengers
Break-even point in dollars = $ 3,150,000/0.5625 = $ 5,600,000
b) What is the break-even point in number of passenger train cars per month?
Average load factor = 70% of 9090 X 0.70 = 63 seats per train car
35,000/ 63 = 556 train cars
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?
Contribution margin = $190 - $ 70 = $120 per passenger
90 X .60 = 54 filled seats
Break-even point in passengers = $ 3,150,000/$120 = 26,250 passengers
26,250/54 = 486 train cars
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?
New contribution margin = $70
Break-even point in passengers = fixed costs/contribution margin
Passengers = 45,000
Train cars = 715
e) Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000?
Before Tax Needed Profit = $1,071,428.57
Before Tax Needed Contribution Margin = $4,671,428.57
Contribution Margin per Customer = $120
Number of Customers Needed = 38,928.57
Whole Number of Customers Needed = 38,929

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