ACC 505 Case Study - Springfield Express - Springfield...

ACC 505 Case Study - Springfield Express
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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
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