AC505 January 12, 2012

a. Cm/unit = selling price- variable cost= 160-70=90
Cm ratio=cm per unit/selling price=90/160=.56
Break even sales= total fixed costs/contribution margin ratio=3,150,000/.56=5,625,000
3,150,000 +0( break even profits are 0 at be point)/90 =35,000 passengers

b. If break even #of passengers =35,000
90 passengers per car =388.88 but at 70% = 272

c. Cm per unit= 190-70=120
Contribution margin ratio =cm per unit/selling price= 120/190=.63
Break even=3,150,000/.63= \$5,000,000
d. Contribution margin per unit =selling price –variable cost=160-90=70
Contribution margin ratio=70/160=.43
Break even sales=3,150,000/.43=\$7,325,581
3,150,000+0/70=45,000 passengers ….500 cars
e. Contribution margin/unit= 205-85=120
Cm ratio=120/205=.58
Break even sales=3,600,000+750,000/.58= \$7,500,000
3,600,000/120=30,000 passengers @70% =21,000 and 233 cars
f. Cm/unit =120-70=50
Cm ratio=50/120=.41
50x90 per car =4500 @80% =3600 passengers x120 =\$432,000 pre-tax
g. Cm per unit=175-70=105
Cm ratio=105/175=.60
Break even sales =3,400,000/.60 = \$5,666,666
No the company should not acquire the new route. With only 60% of passengers riding, but incurring an increase in costs. It would take too many routes in order for the company to actually make a profit.

The company should consider the amount of routes per month, the number of interested customers and the rate of the tickets. [continues]

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