If fares were decreased by 10 an additional 100 fares could

Assignment Help Accounting Basics

Reference no: EM13588058

Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi's base airport to the major city in the state, Metropolis. Each month 40 round-trip flights are made. Shown below is a recent month's activity in the form of a cost-volume-profit income statement.

Fare revenues (400 fares)		$46,500
Variable costs
Fuel	$16,315
Snacks and drinks	770
Landing fees	1,800
Supplies and forms	1,110	19,995
Contribution margin		26,505
Fixed costs
Depreciation	2,940
Salaries	14,196
Advertising	420
Airport hanger fees	1,710	19,266
Net income		$7,239

(a) Calculate the break-even point in (1) dollars and (2) number of fares. (Round answers to 0 decimal place, e.g. 1,225.)

1.		Break-even point		$
2.		Break-even point			fares

(b) Without calculations, determine the contribution margin at the break-even point.

Break-even point

(c) If fares were decreased by 10%, an additional 100 fares could be generated. However, total variable costs would increase by 20%. (Round answers to 0 decimal place, e.g. 1,225.)

(1) How much would net income be impacted by this change?

Net income

decreases / increases to $

(2) Should the fare decrease be adopted? No / Yes

Reference no: EM13588058

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