Question

Sheridan provides shuttle service between four hotels near a medical center and an international airport. Sheridan uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below. Sales (1,470 passengers) $41,160 Variable costs Fuel $5,762 Tolls and parking 3,544 Maintenance 984 10,290 Contribution margin 30,870 Fixed costs Salaries 13,100 Depreciation 1,400 Insurance 1,250 15,750 Net income $15,120 (a1) Calculate the break-even point in dollars. Break-even point $ eTextbook and Media (a2) Calculate the break-even point in number of passengers. Break-even point passengers eTextbook and Media (b) Without calculations, determine the contribution margin at the break-even point. Contribution margin at the break-even point $

Answer 1

Answer:
Sale Price per Unit   = $ 41,160 / 1,470 =   $ 28
Variable Cost per Unit    = $ 10,290 / 1,470 = $ 7
Contribution margin per Unit                =   $ 28 (-) $ 7                =   $ 21 per Unit
Contribution margin ratio                =   ( $ 28 (-) $ 7 ) / $ 28                =    75%
(a)
1)
Break-even point in $             = Fixed cost / Contribution margin ratio             =    $ 15,750 / 75%	$ 21,000
2)
Break-even point in fares             = Fixed cost / Contribution margin ratio             =    $ 15,750 / $ 21	750 fares
3)
Contribution margin at Break even point   =	$ 15,750
Since @ Break Even point, Fixed Costs = Contribution margin