Company Zero Turbulence Airline provides air transportation services between Los

Question

Company Zero Turbulence Airline provides air transportation services between Los Angeles, California, and Kona, Hawai. A single Los Angeles to Kona round-trip flight has the following operating statistics: $10,265 7,862 3,713 45 35 525 285 Flight crew salaries Airplane depreciation e cost per passenger Round-trip ticket price-business clas5 Round-trip ticket price-economy c It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. a. Compute the break-even number of seats sold on a single round-trip flight for the overall enterprise product E. Assume that the overall product mix is 10% business dass and 90% economy class seats. b. How many business class and economy class seats would be sold at the break even point? Type here to search

Explanation / Answer

(a). Total number of seats at break even = 80 seats

Workings:

(b)

Business - class seats at break even = 8 (10% of 80)

Economy class seat at break even =72 (90% of 80)

Business class Economy class Overall for Amount Weight Value Amount Weight Value company Round trip ticket price 525 10% 52.5 285 90% 256.5 309 Variable cost per passenger 45 10% 4.5 35 90% 31.5 36 Contribution per passenger 480 48 225 273 Fixed costs Fuel 10265 Flight crew salaries 7862 Airplane depreciation 3713 Total fixed costs 21840 Break even point (seats) Fixed costs / Contribution per seat = 21840 /273 = 80 Break even point for the overall enterprise product E = 80 seats.

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