Submitted by: Submitted by mudbone60
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Category: Business and Industry
Date Submitted: 11/25/2012 10:26 AM
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
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. Contribution margin per passenger =160-70=$90
Contribution margin ratio =90/160= 56.25%
Break-even point in passengers = Fixed costs/Contribution Margin = 3150000/90=
Passengers =35,000
Break-even point in dollars = Fixed Costs/Contribution Margin Ratio = 3150000/0.5625=$5,600,000
b. Compute # of seats per train car (remember load factor?) 160-70=90 be contribution margin per passenger 90 passengers * 70% Full = 63 passengers per car on average
If you know # of BE passengers for one train car and the grand total of passengers, you can compute # of train cars (rounded) =? 63*90=5670 average contribution margin per train car
3,150,000/5670=556 number of train cars per month
c....