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Ferdinand De Luna Prof. Suryoutomo AC505 Case Study II Managerial Finance 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 | a. What is the break-even point in passengers and revenues per month? Break-even point in passengers = | Total Fixed Costs + Target Profit | | | | Contribution Margin per passenger | | | = | 3,150,000 + 0 | | | | 160-70 | | | = | 3,150,000 | | | | 90 | | | = | 35,000 is the break-even point in passengers | Break-even point in revenues = | Total Fixed Costs + Target Profit | | | | Contribution Margin Ratio | | | = | 3,150,000 + 0 | | | | (160-70) / 160 | | | = | 3,150,000 | | | | 0.5625 | | | = | $5,600,000 break-even point in revenues | b. What is the break-even point in number of passenger train cars per month? Break-even point in train cars = | Total Fixed Costs + Target Profit | | | | Contribution Margin per train car | | | = | 3,150,000 + 0 | | | | (160-70) * (90*.70) | | | = | 3,150,000 | | | | 90*63 | | | = | 556 break-even point in train cars | c. 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? ... View Full Document

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