Week 3 Case Study Accounting

Topics: Variable cost, Costs, Management accounting Pages: 3 (466 words) Published: April 7, 2013
Case Study 1

Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available:

Number of seats per passenger train car 90 Average load factor (percentage of seats filled) 70% Average full passenger fare $ 160 Average variable cost per passenger $ 70 Fixed operating cost per month $3,150,000

Formula :
Revenue = Units Sold * Unit price
Contribution Margin = Revenue – All Variable Cost
Contribution Margin Ratio = Contribution Margin/Selling Price Break Even Points in Units = (Total Fixed Costs + Target Profit )/Contribution Margin Break Even Points in Sales = (Total Fixed Costs + Target Profit )/Contribution Margin Ratio Margin of Safety = Revenue - Break Even Points in Sales

Degree of Operating Leverage = Contribution Margin/Net Income Net Income = Revenue – Total Variable Cost – Total Fixed Cost Unit Product Cost using Absorption Cost = (Total Variable Cost + Total Fixed Cost)/# of units

a. Contribution margin per passenger = 90
Contribution margin ratio = 0.56
Break-even point in passengers = Fixed costs/Contribution Margin = Passengers = 35,000
Break-even point in dollars = Fixed Costs/Contribution Margin Ratio = $ 5,600,000

b. Compute # of seats per train car (remember load factor?) If you know # of BE passengers for one train car and the grand total of passengers, you can compute # of train cars (rounded) = 556

c. Contribution margin = 120
Break-even point in passengers = fixed costs/ contribution margin Passengers = 26,250
train cars (rounded) = 487

d. Contribution margin = 70
Break-even point in passengers = fixed costs/contribution margin Passengers...
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