Reference no: EM132983142

Problem 1: If High Point's actual flight miles were 12% below the case breakeven level of 280,000 flight miles, what fixed cost reduction would be required to keep the operation at a financial breakeven level?

Actual flight miles = Breakeven flight miles - 12% = 280,000 -12% = 246,400 flight miles

New FC = Actual breakeven flight miles x Contribution per flight mile =

= 246,400 ($3.00) = $739,200

If actual flight miles were 12% below the base case breakeven level of 280,000 flight miles, to keep the operation at a financial breakeven level, annual fixed costs would need to be reduced by $739,000.