Ac 505: Case Study Two

a)
Contribution margin= Sales per unit - Varibale 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 = $ 750,000/ ( 1 – tax rate) $ 750,000/ ( 1 – 0.30) $ 750,000 / 0.70 $1,071,429 f)
Net Income with discount = $ 495,000
Net Income with discount for normal operations = $ 5,355,000
Pre Tax Net Income = $ 5,850,000 ($495,000 + $5,355,000) g)
1) No they should not
Contribution margin = $175 - $70 or $105 per passenger 90X .60 = 54 seats 54 X $105 X 20 train cars = $ 113,400 Incfreased fixed cost (250,000) Pretax loss on new route $(136,600)
2)
$175X - $70X - $250,000 = $120,000
$105 X = $370,000
X = 3,524 passengers
3,524 / 54 = 65 train cars 3)
Contribution margin = $105 per passenger 90 X .75 = 67.5 seats 67.5 X $105 X 20 train cars = $141,750
$175X -70X - $250,000 = $120,000
$105X = $370,000
X = 3,524 passengers
3, 524 / 67.5 = 52 train cars
4)
Qualitative factors are considerations in decision making, in addition to the