Case Study 1 Essay

705 Words May 15th, 2013 3 Pages
Case Study 1 Springfield Express is a luxury passenger carrier in Texas. May 26, 2013

a. What is the break-even point in passengers and revenues per month?
ANSWER: BE point in number of Passengers = Fixed Costs / (Full Fare – VC), BE point in Dollar = BE point in Passengers * Full Fare b. What is the break-even point in number of passenger train cars per month?
ANSWER: BE point in number of train = BE point in number of Passengers (from Part a) / number of passengers in each train at the given average load factor c. If Springfield Express raises its average passenger fare to $ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger
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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 at the discounted fare. Additional monthly advertising cost would be $ 180,000. How much pre-tax income would the discounted fare provide Springfield Express if the company has 50 passenger train cars per day, 30 days per month?
ANSWER: Let number of passengers = X

g. Springfield Express has an opportunity to obtain a new route that would be traveled 20 times per month. The company believes it can sell seats at $ 175 on the route, but the load factor would be only 60 percent. Fixed cost would increase by $ 250,000 per month for additional personnel, additional passenger train cars, maintenance, and so on. Variable cost per passenger would remain at $ 70. 1. Should the company obtain the route?
ANSWER: Earnings from the new route = Number of seats per train at the load factor of 60% * (new price – original VC price) * number of trains for the new route – additional fixed costs. 2. How many passenger train cars must

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