Acct505 Caseproject1

Case Study 1 - Managerial Accounting ACCTG_505 Keller Graduate School of Management

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 Average load factor (percentage of seats filled) Average full passenger fare Average variable cost per passenger Fixed operating cost per month 90 70% $ 160 $ 70 $ 3,150,000

Formula:

1. Revenue = Units Sold * Unit Price $ 10,080 63 $ 160 2. Contribution Margin = Revenue - All Variable Cost $ 5,670 $ 10,080 $ 4,410 3. Contribution Margin Ratio = Contribution Margin / Selling Price 35.44 $ 5,670 $ 160 4. Break Even Points in Units = (Total Fixed Costs + Target Profit) / Contribution Margin 555.56 $ 3,150,000 $ $ 5,670 5. Break Even Points in Sales = (Total Fixed Costs + Target Profit) /Contribution Margin Ratio $ 88,888.89 $ 3,150,000 $ 35.44 6. Margin in Safety = Revenue - Break Even Points in Sales 7. Degree of Operating Leverage = Contribution Margin / Net Income 8. Net Income = Revenue - Total Variable Cost - Total Fixed Cost 9. Unit Product Cost using Absorption Cost = (Total Variable Cost + Total Fixed Cost) / # of Units

a) Contribution margin= Sales per unit - Variable expenses per unit $160 - $70 $90 Break even point in passengers = Fixed expenses / Unit CM 3,150,000 / 90 35,000 units Break even point in revenues per month = Unit sales to break even X Sales per unit 35,000 X $160 $5,600,000 b) Break even point in number of passenger cars per month * 90 X 70% 35,000 / 63 63 555.5555556 or 556 Cars c) Break even point in number of passenger cars per month (New fare and Average load factor) *90X60% 35,000 / 54 54 648.1481481 or 648 Cars d) Break even point in passengers (With increased variable cost) = Fixed expenses / Unit CM CM = $160 - $90 = $70 3,150,000 / 70 45,000 units Break even point in number of passenger cars per month *90 x 70% 45,000 / 63 63 714.2857143 or 714 Cars e) After tax income = $...