# Ac 505 Paper

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• Published : July 17, 2012

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Case Study 2 ( Spring field express)

a). Variable cost per passenger=\$70.00
Full fare per passenger=\$160.00
Contribution margin = \$ 160- \$ 70 = \$ 90 per passenger
Contribution margin ratio = \$ 90/\$160 = 56.25%

Break-even point in passengers = Fixed costs/Contribution Margin =         \$ 3,150,000/\$ 90 per passenger = 35,000 passengers       Break-even point in dollars = Fixed Costs/Contribution Margin Ratio=         \$ 3,150,000/0.5625 = \$ 5,600,000.

b). Average load factor=70% of 90
90 X 0.70 =63 seats per train car
35,000/ 63 = 556 train cars ( rounded)

c.) CM = \$190 - \$ 70 = \$120 per passenger
90 X .60 = 54 filled seats
Break-even point in passengers = fixed costs/ contribution margin=         \$ 3,150,000/\$120 = 26,250 passengers
26,250/54 = 486 train cars (rounded)

d.) Contribution margin = \$ 160 - \$ 90 = \$ 70 per passenger       Break-even point in passengers = fixed costs/contribution margin=         \$ 3,150,000/ \$ 70 per passenger = 45,000 passengers         45,000/ 63 = 714 train cars ( rounded)

e). Profit=CM ratio*sales-fixed expenses
Unit CM=205-85=120
CM ratio=120/205=0.5854
750,000=0.5854*sales-3,600,000
Sales= (750,000+3,600,000)/0.5854
Sales= 7,430,816
If it cost one passenger 205, then how many would be needed to generate 7,430,816=7,430,816/205=36,248 passengers. f)). Average load factor=70% of 90=63