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Spencer Kars provides shuttle service between four hotels near a medical center and an international airport....

Spencer Kars provides shuttle service between four hotels near a medical center and an international 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.

Fare revenues ( 1,390 fares) $ 41,700
Variable costs
    Fuel $ 5,604
    Tolls and parking 3,447
    Maintenance 957 10,008
Contribution margin 31,692
Fixed costs
    Salaries 12,800
    Depreciation 1,400
    Insurance 2,520 16,720
Net income $ 14,972

1.Calculate the break-even point in dollars.

2.Calculate the break-even point in number of fares.

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Answer #1

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Solution: Break even point in dollar fixed cost/ Contribution margin ratio (16720) (31692/41700)- 22,000 Break even point in dollar fixed cost/Contribution margin per unit (16720)/(31692/1390) 733 fares

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