Question

Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi's base airport to the major city in the state, Metropolis. Each month, 40 round-trip flights are made. Shown below is a recent month's activity in the form of a cost-volume-profit income statement. $48,000 $17,040 780 2,100 1,200 Fare revenues (400 passenger flights) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms Contribution margin Fixed costs Depreciation Salaries Advertising Airport hanger fees Net income 21,120 26,880 3,050 11,900 300 1,550 16,800 $10,080 Calculate the break-even point in dollars. Break-even point Calculate the break-even point in number of passenger flights. Break-even point flights without calculations, determine the contribution margin at the break-even point. Break-even points

Answer 1

	Break even point =		Fixed cost/contribution margin
			Contribution margin =			Contribution margin
						Sales
						26,880	=	56%
						48,000
1)	Break even point		16800/56%
		$	30000	Answer
2)	Break even		250	Flights
				Fixed cost/contribution margin per unit
				contribution margin per unit=			contribution/passenger flights
							26880/400
							67.2
3)	Break even point		16,800	answer
	(At break even point contribution is equal to fixed cost
4)	Ticket prices		48000/400			120
	now decrease in price					10%
	New ticket price					108
	passenger flights		400*125%=			500
	New variable cost		52.8*125%=			66.00
	New contribution margin			108-66
				42
	total contribution margin			(500*42)		21000
	less fixed cost					16,800
	net income(new)					4,200
	net income will decrease by			5880	(original net income - new net income)