Question

Bristol Car Service offers airport service in a mid-size city. Bristol charges $50 per trip to or from the airport. The variable cost for a trip totals $20, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is $4,800. Required: a. How many trips must Bristol sell every month to break even? b. Bristol's owner believes that 182 trips is a reasonable forecast of the average monthly demand. What is the margin of safety in terms of the number of airport trips? Break-even point Margin of safety trips trips b

Answer 1

	Answer:
	Contribution Margin per unit           = Sale price (-) Variable Cost           =   $ 50 (-) $ 20           =    $ 30
a.	Break even point             = Fixed cost / Contribition margin per unit             =    $ 4,800 / $ 30	160 trips
b.	Margin of Safety            = Average Trips (-) Break even trips            = 182 (-) 160	22 trips