E6.4 (LO 1), AP Service 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. The following is a recent month's activity in the form of a cost-volume-profit income statement. Fare revenues (400 passenger flights) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms Contribution margin Fixed costs Depreciation Salaries Advertising Airport hangar fees Net income $14,000 800 2,000 1,200 3,000 15,000 500 1,750 $48,000 18,000 30,000 20,250 $9.750 Instructions a. Calculate the break-even point in (1) sales dollars and (2) number of passenger flights. b. Without calculations, determine the contribution margin at the break-even point. c. If ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase by the same percentage as passenger flights. Should the ticket price decrease be adopted?

E6.4 (LO 1), AP Service 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. The following is a recent month's activity in the form of a cost-volume-profit income statement. Fare revenues (400 passenger flights) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms Contribution margin Fixed costs Depreciation Salaries Advertising Airport hangar fees Net income $14,000 800 2,000 1,200 3,000 15,000 500 1,750 $48,000 18,000 30,000 20,250 $9.750 Instructions a. Calculate the break-even point in (1) sales dollars and (2) number of passenger flights. b. Without calculations, determine the contribution margin at the break-even point. c. If ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase by the same percentage as passenger flights. Should the ticket price decrease be adopted?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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