Kare Kars provides shuttle service between four hotels near a medical center and

Question

Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare 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 $36,400 Fare revenues (1,300 fares) Variable costs Fuel Tolls and parking Maintenance $6,552 3,276 1,092 10,920 25,480 Contribution margin Fixed costs Salaries Depreciation Insurance 14,827 1,396 1,221 17,444 $8,036 Net income (a) Calculate the break-even point in (1) dollars and (2) number of fares (1) Break-even point (2) Break-even point fares

Explanation / Answer

Statement showing computations Particulars Amount Fare revenues                36,400.00 Variable Costs: Fuel                  6,552.00 Tolls and parking                  3,276.00 Maintenance                  1,092.00 Total Variable costs                10,920.00 Contribution                25,480.00 Fixed Costs: Salaries                14,827.00 Depreciation                  1,396.00 Insurance                  1,221.00 Total Fixed Costs                17,444.00 Income                  8,036.00 PV ratio or cont ratio = Cont/Sales*100 = 25480/36400   70.00% BEP in $ = FC/PV Ratio = 17,444/70%                24,920.00 Revenue per fare = 36400/1300                        28.00 BEP in Fares = 24,920 / 28                      890.00 Contribution at BEP = FC = 17,444

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