Northern Green Airways provides air transportation services between Seattle and

Question

Northern Green Airways provides air transportation services between Seattle and San Diego. A single Seattle to San Diego round-trip flight has the following operating statistics: It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 20% business class and 80% economy class seats. Total number of seats at break-even seats How many business class and economy class seats would be sold at the break-even point? Business class seats at break-even Economy class seats at break-even

Explanation / Answer

(a) Selling Price Per seat (560*20%)+(270*80%) 328 Less: Variable Cost per seat (60*20%)+(50*80%) 52 Contribution Margin per seat 276 Fixed Cost 22080 Total no of seats at breakeven Fixed Cost/ Contribution per passenger 22080/276 80 (b) Business Class seats at break even :80*20% 16 seats Economy Class seats at break even :80*80% 64

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