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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 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.

Fare revenues (400 passenger flights) $48,000
Variable costs
    Fuel $13,120
    Snacks and drinks 780
    Landing fees 1,900
    Supplies and forms 1,000 16,800
Contribution margin 31,200
Fixed costs
    Depreciation 3,050
    Salaries 16,250
    Advertising 500
    Airport hanger fees 1,650 21,450
Net income $9,750

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 point

$

  

  

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                                                                       increasesdecreases to $


(2) Should the ticket price decrease be adopted?                                                                       NoYes

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