Question

Please answer both.

High-Low Method for a Service Company

Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.

	Transportation Costs		Gross-Ton Miles
January	$1,008,400		298,000
February	1,124,300		333,000
March	794,600		216,000
April	1,078,000		323,000
May	904,100		260,000
June	1,159,100		351,000

Determine the variable cost per gross-ton mile and the total fixed cost.

Variable cost (Round to two decimal places.)	$ per gross-ton mile
Total fixed cost	$

Break-Even Sales and Sales Mix for a Service Company

Zero Turbulence Airline provides air transportation services between Los Angeles, California, and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics:

Fuel	$7,699
Flight crew salaries	5,897
Airplane depreciation	2,784
Variable cost per passenger—business class	50
Variable cost per passenger—economy class	40
Round-trip ticket price—business class	530
Round-trip ticket price—economy class	290

It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight.

a. Compute the break-even number of seats sold on a single round-trip flight for the overall enterprise product, E. Assume that the overall product mix is 10% business class and 90% economy class tickets.

Total number of seats at break-even

seats

b. How many business class and economy class seats would be sold at the break-even point?

Business class seats at break-even	seats
Economy class seats at break-even	seats

Answer 1