Submitted by: Submitted by cmour
Views: 199
Words: 482
Pages: 2
Category: Business and Industry
Date Submitted: 04/14/2013 05:44 PM
Case Study 1
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 =$90
Contribution margin ratio =56%
Break-even point in passengers = Fixed costs/Contribution Margin =
Passengers =35,000
Break-even point in dollars = Fixed Costs/Contribution Margin Ratio =
$ 5,625,000
b. Compute # of seats per train car (remember load factor?)
If you know # of BE passengers for one train car and the grand total of passengers, you can compute # of train cars (rounded) =389(35,000 divided by 90)
c. Contribution margin =$120
Break-even point in passengers = fixed costs/ contribution margin
Passengers =26,250
train cars (rounded) =292(26,250 divided by 90)
d. Contribution margin =$70
Break-even point in passengers =...