Break-even sales and sales mix for a service companyZero Turbulence Airline provides air transportation services betweenLos Angeles, California; and Kona, Hawaii. A single Los Angeles to Konaround-trip flight has the following operating statistics:Fuel$7,000Flight crew salaries3,200Airplane depreciation3,480Variable cost per passenger-business class140Variable cost per passenger-economy class120Round trip ticket price-business class800Round trip ticket price-economy class300It is assumed that the fuel, crew salaries, and airplane depreciation arefixed, regardless of the number of seats sold for the round-trip flight.a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overallproduct mix is 10% business class and 90% economy class tickets.b. How many business class and economy class seats would besold at the break-even point?

Breakeven Sales Revenue is that level of sales revenue at which business is recovering its fixed and…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Break-even sales and sales mix for a service company
Zero Turbulence Airline provides air transportation services between
Los Angeles, California; and Kona, Hawaii. A single Los Angeles to Kona
round-trip flight has the following operating statistics:

Fuel	$7,000
Flight crew salaries	3,200
Airplane depreciation	3,480
Variable cost per passenger-business class	140
Variable cost per passenger-economy class	120
Round trip ticket price-business class	800
Round trip ticket price-economy class	300

It is assumed that the fuel, crew salaries, and airplane depreciation are
fixed, regardless of the number of seats sold for the round-trip flight.

a. Compute the break-even number of seats sold on a single round-
trip flight for the overall product, E. Assume that the overall
product mix is 10% business class and 90% economy class tickets.
b. How many business class and economy class seats would be
sold at the break-even point?

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