Question

Accounting Help. Thanks!

I don't know what I'm doing wrong, please help me find the correct answers for everything marked wrong

Exercise 6-4 * Your answer is incorrect. Try again. 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. $45,600 $16,054 790 2,090 1,130 Fare revenues (400 fares) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms Contribution margin Fixed costs Depreciation Salaries Advertising Airport hanger fees Net income 20,064 25,536 2,990 13,950 300 1,800 19,040 $6,496 (a) Calculate the break-even point in (1) dollars and (2) number of fares. (Round answers to 0 decimal place, e.g. 1,225.) 1. Break-even point 11,600 2. Break-even point 102 fares

Answer 1

Solution (a)

For calculating Break-even point, we have to use the following formula,

For Break-even point (In $) = (Total Fixed Costs ÷ Contribution margin ratio)

Contribution margin ratio = (Contribution ÷ Total revenue) × 100

So, as provided,

Contribution = $ 25536

Total Revenue = $ 45600

Total Fixed Costs = $ 19040

So, Contribution margin ratio = (25536 ÷ 45600) × 100

= 0.56 or 56%

Therefore, Break-even point (in $) = $ (19040 ÷ 0.56)

= $ 34000

For Break-even point (in fares) = (Fixed Costs ÷ Contribution per fare)

As provided,

Fixed costs = $ 19040

Contribution per fare = Total Contribution ÷ No. of Fares

Total Contribution = $ 25536

No. of Fares = 400

Contribution per fare = $ (25536 ÷ 400)

= $ 63.84

Break-even point (in fares) = 19040 ÷ 63.84

= 298 (Approx.)

Therefore,

Break-even point (in $) = $ 34000

Break-even point (in fares) = 298