Q6: Spencer Kars provides shuttle service between four hotels near a medical cen

Question

Q6: Spencer Kars provides shuttle service between four hotels near a medical center and an international airport. Spencer Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below.

a)Calculate the break-even point in dollars.

b)Calculate the break-even point in number of fares.

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

Fare revenues ( 1,330 fares) $ 39,900 Variable costs     Fuel $ 5,809     Tolls and parking 3,573     Maintenance 992 10,374 Contribution margin 29,526 Fixed costs     Salaries 12,500     Depreciation 1,100     Insurance 4,530 18,130 Net income $ 11,396

Explanation / Answer

a) Contribution margin ratio = 29526*100/39900 = 74%

Break even point in dollars = 18130/.74 = $24500

b) Break even point in number of fares = 24500/30 = 817 fares

c) Contribution margin = Fixed cost= 18130

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.