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Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available: Number of seats per passenger train car 90 Average load factor (percentage of seats filled)70% Average full passenger fare \$160 Average variable cost per passenger \$70 Fixed operating cost per month \$3,150,000 What is the break-even point in passengers and revenues per month? Breakeven Point in Passengers = Fixed Expenses Contribution Margin Breakeven Point in Passengers = \$3,150,000 (\$160 \$70) Breakeven Point in Passengers = 35,000 Breakeven Point in Revenue = Breakeven Point in Passengers * Average Full Passenger Fare Breakeven Point in Revenue = 35,000 Passengers * \$160 Breakeven Point in Revenue = \$5,600,000 What is the break-even point in number of passenger train cars per month? Contribution Margin = (90 * 70%) * 90 = 5670 Breakeven Point in Passenger Cars = Fixed Expenses Contribution Margin Breakeven Point in Passenger Cars = \$3,150,000 5,670 Breakeven Point in Passenger Cars = 556 passenger train cars If Springfield Express raises its average passenger fare to \$ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger cars? New Contribution Margin = (Avg Passenger Fare Avg VCPer Passenger) * Avg Load Factor * Number of Seats New Contribution Margin = (\$190 - \$70) * 60% * 90 New Contribution Margin = \$120 *60% * 90 New Contribution Margin = 6,480 Breakeven Point in Passenger Cars = Fixed Expenses Contribution Margin Breakeven Point in Passenger Cars = \$3,150,000 6,480 Breakeven Point in Passenger Cars = 486 passenger train cars (Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by \$ 20(Refer to original data.... View Full Document

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