a). Variable cost per passenger=$70.00 Full fare per passenger=$160.00 Contribution margin = $ 160- $ 70 = $ 90 per passenger Contribution margin ratio = $ 90/$160 = 56.25%
Break-even point in passengers = Fixed costs/Contribution Margin =
$ 3,150,000/$ 90 per passenger = 35,000 passengers Break-even point in dollars = Fixed Costs/Contribution Margin Ratio= $ 3,150,000/0.5625 = $ 5,600,000. b). Average load factor=70% of 90 90 X 0.70 =63 seats per train car 35,000/ 63 = 556 train cars ( rounded) c.) CM = $190 - $ 70 = $120 per passenger 90 X .60 = 54 filled seats Break-even point in passengers = fixed costs/ contribution margin= $ 3,150,000/$120 = 26,250 passengers 26,250/54 = 486 train cars (rounded) d.) Contribution margin = $ 160 - $ 90 = $ 70 per passenger Break-even point in passengers = fixed costs/contribution margin= $ 3,150,000/ $ 70 per passenger = 45,000 passengers 45,000/ 63 = 714 train cars ( rounded) e). Profit=CM ratio*sales-fixed expenses Unit CM=205-85=120 CM ratio=120/205=0.5854 750,000=0.5854*sales-3,600,000 Sales= (750,000+3,600,000)/0.5854 Sales= 7,430,816 If it cost one passenger 205, then how many would be needed to generate 7,430,816=7,430,816/205=36,248 passengers.
f)). Average load factor=70% of 90=63
Load factor of 80%=72 Additional load factor =72-63=9 New fixed costs=3,150,00+180,000=3,330,000 Sale per day =50{(63*160)+(120*9)}=558,000 Sales per month=558,000*30=16,740,000 Variable cost per car=70*72=5040 Variable cost per month=252,000*30=7,560,000 CM=Sales-variable costs 16,740,000-7,560,000=9,180 ,000 Profit=CM-Fixed Expenses 9,180,000-3,330,000=5,850,000 a. New load factor=60% of 90=54 Profit=cm ratio*sales-fixed expenses New fixed costs=3,150,000+250,000=3,400,000 CM=175-70=105 CMratio=0.6 120,000=0.6*sales-3,400,000 Sales=5,866,667/175=33524 1 car=54 passengers 33524 will fill up 33524/54=566 cars New load=75% of 90=68 passengers For 120,000 you need 33,524 passengers With 68 passengers you need=33,524/689=493 cars