Exercise 18-11 Kare Kars provides shuttle service between four hotels near a med

Question

Exercise 18-11 Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare 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. Fare revenues (1,500 fares) $42,000 Variable costs Fuel $7,560 Tolls and parking 3,780 Maintenance 1,260 12,600 Contribution margin 29,400 Fixed costs Salaries 14,994 Depreciation 1,411 Insurance 1,235 17,640 Net income $11,760 (a) Calculate the break-even point in (1) dollars and (2) number of fares. (1) Break-even point $ (2) Break-even point fares (b) Without calculations, determine the contribution margin at the break-even point. Contribution margin at the break-even point $

Explanation / Answer

Kare Kars Amount Fare Revenue $ 42,000.00 Variable Cost Fuel $    7,560.00 Toll & Parking $    3,780.00 Mintenance $    1,260.00 Total Variable Cost $ 12,600.00 Contribution Margin $ 29,400.00 Fixed Cost Salaries $ 14,994.00 Depreciation $    1,411.00 Insurance $    1,235.00 Net Income $ 11,760.00 Contribution Margin Ratio 70 % a) Break Even Point in Dollors $ 25,200.00 Break Even Point in Fares 900 b) Without calculation Contribution margin at breakeven point $ 17,640.00

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