Question

Exercise 18-11 Spencer Kars provides shuttle service between four hotels near a medical center and an internationa airport. Spencer Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below. $ 29,260 $ 4,588 2,822 783 Fare revenues ( 1,330 fares) Variable costs Fuel Tolls and parking Maintenance Contribution margin Fixed costs Salaries Depreciation Insurance Net income 8,193 21,067 13,100 1,100 704 14,904 $ 6,163 X] your answer is incorrect. Try again. Calculate the break-even point in dollars. Break-even point Your answer is incorrect. Try again. Calculate the break-even point in number of fares. (Round answer to o decimal places, ac 5,275.) Break-even point fares

Answer 1

Revenue per fare = Fare revenues / Number of fares
Revenue per fare = $29,260 / 1,330
Revenue per fare = $22.00

Contribution margin per fare = Contribution margin / Number of fares
Contribution margin per fare = $21,067 / 1,330
Contribution margin per fare = $15.84

Contribution margin ratio = Contribution margin / Fare revenues
Contribution margin ratio = $21,067 / $29,260
Contribution margin ratio = 0.72

Answer a.

Breakeven point in dollars = Fixed costs / Contribution margin ratio
Breakeven point in dollars = $14,904 / 0.72
Breakeven point in dollars = $20,700

Answer b.

Breakeven point in fares = Breakeven point in dollars / Revenue per fare
Breakeven point in fares = $20,700 / $22.00
Breakeven point in fares = 941

Answer c.

Contribution margin at the breakeven point = Fixed costs
Contribution margin at the breakeven point = $14,904