takeAssignmentSessionLocator roblems eBook Break-Even Sales and Sales Mix for a
ID: 2541946 • Letter: T
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takeAssignmentSessionLocator roblems eBook Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airline provides air transportation services between Los Angeles, California; and Kona, Hawai. A single Los Angeles to Kona round-trip flight has the following operating statistics: Fuel Flight crew salaries Airplane depreciation Variable cost per passenger-business class Variable cost per passenger-economy class Round-trip ticket price-business class Round-trip ticket price-economy class $17,822 13,651 6,447 45 35 585 295 It is assumed that the fuel, crew salaries, and airplane depredation are fixed, regardless of the number of seats sold for the round-trip light. It d round the answers to nearest whole number 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 is 209% business class and 80% economy class seats. Total number of seats at break-even seats b. How many business class and economy class seats would be sold at the break-even point? Business class seats at break-even Economy class seats at break-even seats seats Previous Next Chedk May Work 2 more Check My Work uses remainng 2 more Check My Work uses remaining 9:39 PM ^Explanation / Answer
Requirement a Business class Economy class Round trip ticket price 585 295 Variable cost 45 35 Contribution margin per seat 540 260 X Sales mix percentage 20% 80% 108 208 Weighted Average CM per seat 316 Fixed Costs: Fuel 17,822 Flight crew salaries 13,651 Airplane depreciation 6,447 37,920 Break-even Point in seats of Sales Mix = Total Fixed Cost ÷ Weighted Average CM per seat = $37,920/$ 316 =120 Seats Requirement b Number of seats of Class at break even point Class Business class Economy class Sales mix ratio 20% 80% X Total Break even Seats 120 120 Class units at Break even point 24 96 Requirement a 1 Margin of safety in dollar = Actual sales - Break even sales = 780,000-475,000 = 305,000 2 Margin of safety percentage = (Actual sales - Break even sales)/ Actual Sales *100 = (780,000-475,000)/780000*100 =39% Requirement b Break even sales dollars = Fixed cost /CM ratio Contribution Margin ratio = 30% Variable cost is 70% then CM is 30% Break even sales dollars = 1,350,300/30% =4,501,000 Assume A= Actual sales Margin of safety percentage = (Actual sales - Break even sales)/ Actual Sales *100 30% =(A-4,501,000)/ A X100 0.3A =A-4,501,000 0.7 A = 4,501,000 A =4501000/0.7 A =6,430,000
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