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Managerial Accounting 505 Case Study Week 3

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Managerial Accounting 505 Case Study Week 3

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Grade 45/50
Managerial Accounting 505 Case Study Week 3
A. What is the break-even point in passengers and revenues per month?

Total Per UnitPercent
Sales: 160 X 90 $14,400$ 160100%
Less variable costs/expenses: .70 X 90 $ 6,300 $7044% Contribution margin: $ 8,100$9056%
Less fixed costs/expense: $3,150,000
Net operating income: $3,141,900
8,100 /14,400 = 56%
100 - 56 = 44%
BEP in passengers (fixed costs / contribution margin)
3,150,000 / 90 = 35,000 passengers
BEP in dollars (passenger per month X selling price)
35,000 X 160 = 5,600,000
B. What is the break-even point in number of passenger train cars per month? # of seats per passenger train cars X Average load factor
BEP in passenger’s car per month 35,000/ (90x.70)
35,000/ 63 = 556 passenger train per month

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

Total Per UnitPercent
Selling Price $17,100$190100
Less variable costs/expense$6,300$70 37
Contribution margin$10,800$12063
BEP in passengers (fixed cost / unit cm )
3,150,000 / 120 = 26,250
BEP in passengers per month in dollars (fixed costs / cm ratio) 3,150,000 / .63 = 5,000,000
# of seats per passenger train cars X Average load factor 90 X .60 = 54 BEP # of passengers cars 26,250 / (90 X .60) 54 = 486 passengers train cars per month 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?

BEP in passengers Fixed operating cost /contribution margin
$3,150,000/ 70 = 45,000 passengers per month BEP...

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