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View History Bookmarks Tools Window Help Tue 6:35 PM I 10ine teach O 0 v2cengag ain.do?invoker assignmeSearch Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airfline provides air transportation services between Los Angeles, California; and Kona, Hawalit. A single Los Angeles to Kona round-trip flight has the following operating statistics Fuel Füght crew salaries Airplane depreciation Variable cost per passenger-business class Variable cost per passenger-economy class Round-trip ticket price-business class Round-trip ticket price-economy class It is assumed that the fuel, crew salaries, $8,573 6,566 3,101 45 575 295 and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip fight. If required round the answers to nearest whole number a. Compute the break-even nu economy class seats Total number of seats at break-even busi class and so mber of seats sold on a single round-trp fight for the overall product, E. Asume that the overall product is 20% seats b. How many business class and economy class seats would be sold at the break-even poine? seats Business dass seats at break-even Economy class seats at break-even Previous Next Check My Work 2 more Check My Work uses remaining. All work saved

Explanation / Answer

Fixed costs = Fuel + Flight crew salaries + Airplane depreciation

= 8,573 + 6,566 + 3,101

= 18,240

Contribution margin per round trip (business class) = Ticket price - Variable costs (business class)

= 575 - 55

= 520

Contribution margin per round trip (economy class) = Ticket price - Variable costs (economy class)

= 295 - 45

= 250

Weighted average contribution margin = Contribution margin (business class) * 20% + Contribution margin (economy class) * 80%

= (520*20%) + (250*80%)

= 304

a.

Total number of seats to breakeven = Fixed costs / Weighted average contribution margin

= 18,240 / 304

= 60

b.

Business class seats at breakeven = 60 * 20% = 12

Econonmy class seats at breakeven = 60 * 80% = 48

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