Case Study 2 Managerial Accounting

Continues for 2 more pages »
Read full document

Case Study 2 Managerial Accounting

By | Jan. 2013
Page 1 of 3
David Shim Case Study #2

A) What is the break-even point in passengers and revenues per month? Unit CM = $160 – $70= $90

Unit of Sales = 3,150,000 / $90= 35,000 passengers

Unit of Sales = 35,000 x $160= $5,600,000 revenue

B) What is the break-even point in number of passenger train cars per month? Unit of Sales = 35,000/63= 555.5= 556 passenger cars

C) If Springfield Express raises its average passenger fare to $ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger cars? 90 x .60 = 54

Unit CM = $190 – $70= $120
Unit of Sales = $3,150,000 / $120= 26,250 passengers Unit of Sales = 26,250/54= 486.1 =486 passenger cars

D) (Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the new break-even point in passengers and in number of passenger train cars? Unit CM = 160 – 90= 70

Unit of Sales = 3,150,000 / 70 = 45,000 Passengers Unit of Sales = 45,000/63= 714.2= 714 passenger cars

E) Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000? Unit CM = 205 – 85= 120

after-tax profit = 750,000/(1-.30)= 750,000/.70= 1071428.57 205X – 3,600,000 – 85X = 1,071,428.57
(1071428.6+3600)/ (205-85)=8959 passengers

F) Springfield Express is considering offering a...
Hide

Rate this document

What do you think about the quality of this document?

Share this document

Let your classmates know about this document and more at Studymode.com