*Exercise 20-4 (Part Level Submission) Comfi Airways, Inc., a small two-plane pa
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Question
*Exercise 20-4 (Part Level Submission) 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. $64,000 Fare revenues (400 passenger flights) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms $15,240 760 2,000 1,200 19,200 44,800 Contribution margin Fixed costs Depreciation Salaries Advertising Airport hanger fees 3,000 16,840 300 1,700 21,840 $22,960 Net income (a1) Your answer is correct. Calculate the break-even point in dollars. Break-even point g31200 Attempts: 1 of 3 used "(a2) Your answer is correct. Calculate the break-even point in number of passenger flights. Break-even pont Tgs flights Attempts: 1 of 3 usedExplanation / Answer
Answers
Total amount for 4000 passenger flights
Amount per passenger flight
[A]
[B = A / 400]
Fare revenue
$ 64,000.00
$ 160.00
Variable costs:
Fuel
$ 15,240.00
$ 38.10
Snacks
$ 760.00
$ 1.90
Landing Fees
$ 2,000.00
$ 5.00
Supplies & Forms
$ 1,200.00
$ 3.00
Total variable cost
$ 19,200.00
$ 48.00
Contribution margin
$ 44,800.00
$ 112.00
A [See Working]
Ticket price
$ 160.00
B = A x 10%
Decrease in ticket prices
$ 16.00
C = A - B
New ticket price
$ 144.00
D [See working]
Variable cost per passenger flight
$ 48.00
E = C - D
New Unit Contribution margin
$ 96.00
F
No. of passenger flights
400
G = F x 25%
Increase in passenger
100
H = F+G
New no. of passenger flight
500
I = H x E
Amount of total contribution
$ 48,000.00
J [given in question]
Amount of total contribution when prices were not decreased
$ 44,800.00
K = I - J
Increase in Net Income
$ 3,200.00
L [given in question]
Existing Net Income
$ 22,960.00
M = K + L
New Net Income will increase to
$ 26,160.00
---- ANSWER: Net Income will INCREASE to $ 26,160.
YES, The ticket prices decrease SHOULD be ADOPTED.
Total amount for 4000 passenger flights
Amount per passenger flight
[A]
[B = A / 400]
Fare revenue
$ 64,000.00
$ 160.00
Variable costs:
Fuel
$ 15,240.00
$ 38.10
Snacks
$ 760.00
$ 1.90
Landing Fees
$ 2,000.00
$ 5.00
Supplies & Forms
$ 1,200.00
$ 3.00
Total variable cost
$ 19,200.00
$ 48.00
Contribution margin
$ 44,800.00
$ 112.00
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