# Exercise 19-4 (Part Level Submission) Comfi Airways, Inc., a small two-plane passenger airline, has asked for...

Exercise 19-4 (Part Level Submission) Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi's base airport to the major city in the state, Metropolis. Each month, 40 round-trip flights are made. Shown below is a recent month's activity in the form of a cost-volume-profit income statement. \$64,000 \$25,200 800 1,800 1,000 Fare revenues (400 passenger flights) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms Contribution margin Fixed costs Depreciation Salaries Advertising Airport hanger fees 28,800 35,200 3,100 12,940 300 1,700 18,040 \$17,160 Net income (a1) Your answer is correct. Calculate the break-even point in dollars. Break-even point 32800
(a2) Your answer is correct. Calculate the break-even point in number of passenger flights. Break-even point T 205 flights Click if you would like to Show Work for this question: Open Show Work
(b) r answer is correct. Without calculations, determine the contribution margin at the break-even point. Break-even point 18040 Click if you would like to Show Work for this question: Open Show Work
(c) Your answer is partially correct. Try again. If ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase by the same percentage as passenger flights. (1) How much would net income be impacted by this change? 1440 Net income increases to (2) Should the ticket price decrease be adopted? Click if you would like to Show Work for this question: Open Show Work

 a1) Total Fixed Costs (a) \$18,040 Contribution Margin Ratio (\$35,200/\$64,000) (b) 0.55 Break-even point in dollars (a / b) \$32,800 a2) Total Fixed Costs (a) \$18,040 Contribution Margin per unit (\$35,200/400 passengers) (b) \$88 Break-even point in units (a / b) 205 b) Break-even point in units (a) 205 Contribution Margin per unit (\$35,200/400 passengers) (b) \$88 Contribution Margin at Break-even point \$18,040 c) Revised selling price per unit (\$64,000/400 = \$160 - 10% of \$160) (a) \$144 Number of Passengers (400 + 25% of 400) (b) 500 Revised Sales Revenue (a * b) \$72,000 Less: Variable Costs (\$28,800/400 = \$72 * 500 passengers) (\$36,000) Revised Contribution Margin \$36,000 Less: Fixed Costs (\$18,040) Revised Net Income \$17,960 The net income is Increased from \$17,160 to \$17,960.
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