Airport Connection provides shuttle service between four hotels near a medical c

Question

Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection 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.

500

8,640

1,128

15,428

$11,932

$

Fare revenues (1,440 fares)
$36,000 Variable costs
    Fuel $5,040
    Tolls and Parking 3,100
    Maintenance

500

8,640

Contribution margin
27,360 Fixed costs
    Salaries 13,000
    Depreciation 1,300
    Insurance

1,128

15,428

Net income

$11,932

Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection 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. Calculate the break - even point in (1) dollars and (2) number of fares. Without calculations, determine the contribution margin at the break - even point.

Explanation / Answer

Breakeven point in dollars = $20,300 Breakeven point in fares = 812 rides Contribution Margin = 76% Fare Price = $36,000/1440 = $25 Variable cost per unit = $8,640/1440 = $6 Profit including variable costs = $27,360 1,440 fares, so: Profit per unit = $27,360/1440 = $19 Fixed costs = $15,428 Break even point in fares = $15,428/$19 = 812 rides 812 * $25 = $20,300 Contribution margin = Profit per unit * Unit / Breakeven point in dollars = $19 * 812 / $20,300 = $15,428 / $20,300 = 76%

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