Reference no: EM132999322

Lisa's Ferry CompanyLisa has the following costs:

Ticket processing: $.50 per passenger

Taxes: $.80 per passenger

Lisa is considering adding ferry services between June Island and Starfish Island. Lisa can rent ferries on a monthly basis at $3,200 per ferry, per month. Each ferry can accommodate 75 passengers, and can make 8 one-way trips a day, 30 days a month. Lisa decides to charge $6 per one-way ride.

Fuel: $105.00 per one-way trip

Crew Salaries: $60.00 per one-way trip

Ferry Cleaning: $25.00 per one-way trip

Shore costs vary with the number of ferries in the following manner:

Number of Ferries to Total Shore Costs

1 Ferry = $12,000 per month

2 Ferries: = $13,000 per month

3 Ferries = $14,000 per month

4 Ferries = $15,000 per month

Problem 1) What is the firm's complete cost structure? Identify the fixed costs, variable costs, and step costs in this problem as well as the activities that drive Lisa's costs.

Problem 2) Calculate the contribution margin per passenger. Calculate the contribution margins per one-way trip for each of the frequencies in Table I.

Problem 3) Imagine that Lisa has rented 1 ferry per month. How many one-way trips should she operate? Repeat this for 2 ferries, 3 ferries, and 4 ferries.

Problem 4) How many ferries should Lisa rent?

Problem 5) Using break even analysis, provide Lisa with insights into how the risk with 2 ferries compares to the risk of 3 ferries.