Question 1 Spencer Kars provides shuttle service between four hotels near a medi

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Question 1 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. $30,130 Fare revenues (1,310 fares) Variable costs Fuel Tolls and parking Maintenance $4,387 2,698 749 7,834 22,296 Contribution margin Fixed costs Salaries Depreciation Insurance 12,100 1,300 2,140 15,540 $6,756 Net income Calculate the break-even point in dollars. Break-even point LINK TO TEXT LINK TO TEXT Calculate the break-even point in number of fares. (Round answer to 0 decimal places, e.g. 5,275.) Break-even point fares LINK TO TEXT LINK TO TEXT Without calculations, determine the contribution margin at the break-even point. Contribution margin at the break-even point s LINK TO TEXT LINK TO TEXT

Explanation / Answer

Ans.1 Break-even point $21,000 *Calculation: Break-even point   = Fixed cost / Contribution margin ratio 15540 / 74% 21000 *Contribution margin ratio = Contribution / Sales * 100 22296 / 30130 * 100 73.999 74% (rounded) Ans.2 Break-even point 913 fares *Calculation: Break-even point   = Fixed cost / Contribution margin per unit 15540 / 17.02 913 *Contribution margin per unit = Total contribution margin / Fares 22296 / 1310 17.02 Ans.3 Contribution margin at the break-even point   $15540 Explanation: Contribution margin at the break-even point is equal to the fixed cost, as Break-even point is a situation where a company has no profit and no loss (Profit/loss = 0)

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