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Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic...

Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operatiIf ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase

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. $48,000 $17,040 780 2,100 1,200 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 Net income 21,120 26,880 3,050 11,900 300 1,550 16,800 $10,080 Calculate the break-even point in dollars. Break-even point Calculate the break-even point in number of passenger flights. Break-even point flights without calculations, determine the contribution margin at the break-even point. Break-even points
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? Net income to s (2) Should the ticket price decrease be adopted?
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Answer #1
Break even point = Fixed cost/contribution margin
Contribution margin =    Contribution margin
Sales
26,880 = 56%
48,000
1) Break even point 16800/56%
$ 30000 Answer
2) Break even 250 Flights
Fixed cost/contribution margin per unit
contribution margin per unit= contribution/passenger flights
26880/400
67.2
3) Break even point 16,800 answer
(At break even point contribution is equal to fixed cost
4) Ticket prices 48000/400 120
now decrease in price 10%
New ticket price 108
passenger flights 400*125%= 500
New variable cost 52.8*125%= 66.00
New contribution margin 108-66
42
total contribution margin (500*42) 21000
less fixed cost 16,800
net income(new) 4,200
net income will decrease by 5880 (original net income - new net income)
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