Evaluate peyton travel''s new break-even point

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Reference no: EM1313057

Calculation of break even sales using CVP formula.

The following are the monthly fixed expenses for Peyton Travel:

Office rent:	$3,000.00
Depreciation of office furniture	200
Utilities	110
Telephone	520
Reservation Service Fees	380
Travel Agent Salaries	1,400.00

Variable expenses include the following:

Travel Agent Commission	5.0% of sales
Advertising	6.0% of sales
Supplies and Postage	1.0% of sales
Telephone and Reservation Service usage fees	3.0% of sales

a) Use the contribution margin ratio CVP formula to compute Peyton Travel's break-even sales in dollars. If the average sales price of a ticket is $660.00; how many tickets must be sold to reach break-even?

b) Use the income statement equation [revenue - (variable expense + fixed expense) = operating income] to compute the dollar sales needed to earn a target monthly operating income of $6,290.00. How many tickets is this if the average sales price of a ticket is $660.00?

c) Assume the average sales price decreases to $440.00 per ticket. Use the contribution margin approach to compute Peyton Travel's new break-even point in tickets sold. How does this compare to your answer in part a)?

Reference no: EM1313057

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