Break-Even Sales and Sales Mix for a Service CompanyZero Turbulence Airline provides air transportation services between Los Angeles,, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the followingoperating statistics:Fuel$6,956Flight crew salaries5,328Airplane depreciation2,516Variable cost per passenger-business class55Variable cost per passenger-economy class45Round-trip ticket price-business class585Round-trip ticket price-economy class315It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. If required round the answers tonearest whole number.a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 10 % business class and 90 %economy class seats.Total number of seats at break-evenseatsb. How many business class and economy class seats would be sold at the break-even point?Business class seats at break-evenseatsEconomy class seats at break-evenseatsCheck My Work2 more Check My Work uses remaining.PreviousNext

Question
Asked Sep 29, 2019
Break-Even Sales and Sales Mix for a Service Company
Zero Turbulence Airline provides air transportation services between Los Angeles,, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following
operating statistics:
Fuel
$6,956
Flight crew salaries
5,328
Airplane depreciation
2,516
Variable cost per passenger-business class
55
Variable cost per passenger-economy class
45
Round-trip ticket price-business class
585
Round-trip ticket price-economy class
315
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. If required round the answers to
nearest whole number.
a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 10 % business class and 90 %
economy class seats.
Total number of seats at break-even
seats
b. How many business class and economy class seats would be sold at the break-even point?
Business class seats at break-even
seats
Economy class seats at break-even
seats
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2 more Check My Work uses remaining.
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Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airline provides air transportation services between Los Angeles,, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics: Fuel $6,956 Flight crew salaries 5,328 Airplane depreciation 2,516 Variable cost per passenger-business class 55 Variable cost per passenger-economy class 45 Round-trip ticket price-business class 585 Round-trip ticket price-economy class 315 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. If required round the answers to nearest whole number. a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 10 % business class and 90 % economy class seats. Total number of seats at break-even seats b. How many business class and economy class seats would be sold at the break-even point? Business class seats at break-even seats Economy class seats at break-even seats Check My Work 2 more Check My Work uses remaining. Previous Next

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Step 1

a.

Compute the break-even number of seats sold on a single round-trip flight for the overall Product E as follows: 

Compute the break-even point in sales units for the overall Product E:

Break-even point in
Fixed Costs
sales for Product E
Contribution margin per unit
$14,800
$296
= 50 seats
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Break-even point in Fixed Costs sales for Product E Contribution margin per unit $14,800 $296 = 50 seats

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Step 2

Workings:

  1. Compute the fixed cost:
Amounts in (S)
6,956
Particulars
Fuel
Flight crew salaries
Airplane depreciation
Fixed cost
5,328
2,516
14,800
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Amounts in (S) 6,956 Particulars Fuel Flight crew salaries Airplane depreciation Fixed cost 5,328 2,516 14,800

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Step 3

2. Compute the selling price ...

(Selling price per unit
of business classx Salesof econ omy classx Sales
mix of business class
(Selling price per unit
Selling price per
unit of Product E
mix of economy class
(S585 per seatx10%) + (S315 per seat x 90%)
- $58.5 per seat 283.5 per seat
= $342 per seat
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(Selling price per unit of business classx Salesof econ omy classx Sales mix of business class (Selling price per unit Selling price per unit of Product E mix of economy class (S585 per seatx10%) + (S315 per seat x 90%) - $58.5 per seat 283.5 per seat = $342 per seat

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