Bristol Car Service offers airport service in a mid-size city. Bristol charges $

Question

Bristol Car Service offers airport service in a mid-size city. Bristol charges $56 per trip to or rom the airport. The variable cost for a trip totals $30, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is $7,280 Required: a. How many trips must Bristol sell every month to break even? Break-even point trips b. Bristo's owner believes that 300 trips is a reasonable forecast of the average monthly demand What is the margin of safety in terms of the number of airport trips? trips Margin of safety

Explanation / Answer

a. Break Even Point = Fixed Cost / Contribution Margin Per Unit

= Fixed Cost / ( Sales Price Per Unit - Variable Cost Per Unit)

= $ 7,280 / ( $ 56 - $ 30)

= 280 trips

Hence the correct answer is 280 trips

b. Margin of Safety= Budgeted Units - Break Even Units

= 300 Trips - 280 Trips

= 20 Trips

Hence the correct answer is 20 Trips

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