Question

Bristol Car Service offers airport service in a mid-size city. Bristol charges $36 per trip to or from the airport. The variable cost for a trip totals $28, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is $2,160. Required: a. How many trips must Bristol sell every month to break even? Break-even point trips b. Bristol's owner belleves that 290 trips is a reasonable forecast of the average monthly demand. What is the margin of safety in terms of the number of airport trips? Margin of safety rips

Answer 1

a) Break even point = 270 trips

Explanation:- Break even(in trips)= Fixed cost/contribution margin per unit.

Sale price per unit	$36
Variable cost per unit	($28)
Contribution margin per unit	$8
Fixed cost	$2,160
Break even ( in trips)	$2,160/$8 = 270 trips

b) Margin of safety = 20 trips

Explanation:-

Margin of safety = Total no. Of trips - Break even trips

Margin of safety = 290 - 270

Margin of safety = 20 trips