Acct 505 Course Project Essay examples

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Ronice M. Bruce Week 3_Course Project A - CASE STUDY ACCT 505- Prof Main January 26, 2013 Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available: Number of seats per passenger train car 90 Average load factor (percentage of seats filled) 70% Average full passenger fare $160 Average variable cost per passenger $70 Fixed operating cost per month $3,150,000 a. What is the break-even point in passengers and revenues per month? Fixed cost | $ 3,150,000 | | Selling price | $ 160 | | Variable cost | $ 70 | | Break-even (Passengers) | 35,000 | BE (Passengers) = Fixed cost/ (Selling price – Variable Cost)…show more content…
Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000? Required pre-tax income | $1,071,429 | Pre tax income = After –Tax income/ Before tax profit - tax rate = 750,000 /(1-30%) = 750,000 / .7 = 1,071,428.57 | Fixed cost | 3,600,000 | | Selling price | 205 | | Variable cost | 85 | | Load factor | 70% | | Capacity of train | 90 | | Target number of Passengers | 38,929 | Target # of Passengers = Fixed Cost + Target Profit/ Unit Contribution Margin = 3,600,000 + 1,071,428 / (Selling Price – Variable Cost Per unit) = 4,671,429 / (205 – 85) = 4,671,429 / 120 = 38,928.57 | With a tax rate of 30% and an average fair rate of $205, Springfield Express will need 38,929 passengers per month to generate an after-tax profit of $750,000. f. (Use original data). Springfield Express is considering offering a discounted fare of $ 120, which the company believes would increase the load factor to 80 percent. Only the additional seats would be sold

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