Exercise 5-11 Spencer Kars provides shuttle service between four hotels near a m

Question

Exercise 5-11 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 37,240 Fare revenues(1,330 fares) Variable costs Fuel Tolls and parking Maintenance 5,005 3,078 855 8,938 28,302 Contribution margin Fixed costs Salaries Depreciation Insurance 12,100 1,400 1,852 15,352 12,950 Net income Your answer is correct. Calculate the break-even point in dollars. Break-even point

Explanation / Answer

Price per fare = $ 37,240 / 1330

Price per fare = $28

Breakeven point in dollars = (fixed cost / selling price - variable cost ) * price per unit

Breakeven point in dollars = ( 15,352 / 28 - 6.72 ) * 28

Breakeven point in dollars = $ 20,200

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Breakeven point in number of fares = ( 15,352 / 28 - 6.72)

Breakeven point in number of fares = 721 fares

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Contribution margin at break even point = Selling price per unit -variable cost per unit

Contribution margin at break even point = $ 28 - $ 6.72

Contribution margin at break even point = $ 21.28 * 721

Contribution margin at break even point = $ 15,342.88

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