Case Study 1
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
Revenue = Units Sold * Unit price
Contribution Margin = Revenue – All Variable Cost
Contribution Margin Ratio = Contribution Margin/Selling…show more content…
Before tax profit less the tax rate times the before tax profit = after-tax income = $
Then, proceed to compute # of passengers -=?
VC=85, FC=360000, Fare=205, Tax=30%
After tax = 750000/.70=1071428.57
# of passenger
205-85=1071429+3600000*120 = 4671429
4671429/129 = 38928.57 or 38929
f. # of discounted seats = ?
Contribution margin for discounted fares X # discounted seats = $ each train X$ ? train cars per day X ? days per month= $? minus $ additional fixed costs = $? pretax income.
90*80%= 72-63= 9 seats
675000-180000=495000 pre tax income
Compute Contribution margin =175-70=150 per passenger
Then, # seats X $ X # train cars = 90*60=54 seats*105*20 = $ 113400
Increased fixed cost ( ?) (250000)
Pretax gain (loss) on new route $ 136600
2 and 3. Compute # of passengers and train cars using computation approaches employed in some of the above problems.
175x-$70x-$250000=$120000 , 105x=370000, x=3524 passenger
3524/54=65 train car, 3.90*75= 68 seat filled, 3524/68= 52 train cars
4. Springfield should consider such things as (Think