Helicopter Rides.The price of each ticket is $150 and the variable costs average

ID: 2554630 • Letter: H

Question

Helicopter Rides.The price of each ticket is $150 and the variable costs average $60 per person. Steve's monthly fixed costs are $58,500.

1. What is Steve's contribution margin per ride?

2. How many tours must the company conduct in a month to break even?

3. What sales revenue is needed to produce a net profit of $36,000 per month?

4. What is Steve's contribution margin ratio?

5. If annual sales increase by $100,000, by what amount will operating income increase?

6. If annual sales decrease by $50,000, by what amount will operating income decrease?

1. Contribution margin per ride = Price - Variable Cost

= $ 150 - $ 60

= $ 90 per ride

2. Break Even Point ( in Tours) = Fixed Cost / Contribtuion Margin Per Ride

= $ 58,500 / $ 90

= 650 tours

3. Net Profit Required = $ 36,000

Add: Fixed Cost = $ 58,500

Total Contribution Required= $ 94,500

Contribution margin per ride = $ 90

Sales Units needed to achieve required profit = Contribution margin / Contribution margin per ride

= $ 94,500 / $ 90

= 1,050

Hence,Sales Revenue needed to achieve required profit = Sales Units needed to achieve required profit * Selling Price

= 1,050 * $ 150

= $ 157,500

Hence the correct answer is $ 157,500

4. contribution margin ratio = contribution margin per ride / price per ride *100

= $ 90 / $ 150 *100

= 60.00%

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