Springfield

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 reek-even point in number of passenger cars? Number of seats per train = 90 x Load factor percentage = 54 Pass per train Unit CM= $1 90 Increase pass fare – $70 average passenger fare= $120 unit CM Unit Sales = $3,150,000 Fixed Expenses / $120 Unit CM= 26,250 break even passengers Unit Sales= 26,250 passengers/ 54 pass per train = 486. 11 or 486 monthly break-even point In passenger cars d. Refer to original data. ) Fuel cost Is a significant variable cost to any railway. If crude OLL Increases by $ 20 per barrel, It Is estimated that variable cost per passenger will rise o S 90.

What will be the new break-even point in passengers and in number of passenger train cars? Unit CM 160 average full pass fare- 90 Number of seats- 70 unit Sales: $3,1 50,000 Fixed expenses/ 70 Number of seats= 45,000 Break-even passengers Unit Sales = 45,000 passengers/ 63 passengers (90 *70%= 63)=714. 2= 714 passenger train cars e.

Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, owe many passengers per month are needed to generate an after-tax profit of $ 750,000? Unit CM= $205 average fare – $85 variable cost per passenger= 120 After tax profit= $750,000 Before Tax profit= After tax profit 750,000/ = $1 ,071 ,429 unit CM- $1 ,429 + Fixed expenses $4,671 ,429 unit sales- / $120 variable cost $38,928.

8 $38,928. 58 unit sales * $85 bankable cost= @ bankable cost Expenses f. (Use original data). Springfield Express is considering offering a discounted fare of $ 120, which the company believes would increase the load factor to 80 percent. Only the additional seats would be sold at the discounted fare.

Additional monthly advertising cost would be $ 180,000. How much pre-tax income would the discounted fare provide Springfield Express if the company has 50 passenger train cars per day, 30 days per month?

Previous Unit CM= $160 Average Fare – $70 Variable Fare= $90 Unit CM= $120 Average Fare – $70 variable Fare = $50 Previous Load Factor = 70% Load factor= 80% 80% * 90 passengers= 72 seats sold per passenger car @ 80% load factor Previous Load Factor =70%* 90 passenger seats = 63 2 seats sold @ 80% load fact- 63 seats sold @ Previous load factor= 9 discounted seats 9 seats @ $50 per seat = $450 $450 @ 50 cars per day= $22,500 $22,500 @ 30 days = $675,000 Discounted income= Advertising costs= $495,000 {Pre tax income} g.

Springfield Express has an opportunity to obtain a new route that would be traveled 20 times per month. The company believes it can sell seats at $ 175 on the route, but the load factor would be only 60 percent. Fixed cost would increase by $ 250,000 per month for additional personnel, additional passenger train cars, maintenance, and so on. Variable cost per passenger would remain at $ 70.

Should the company obtain the route? No. Here is a decrease from Unit CM= $175 – $70 variable cost= $105 60% * 90 passengers = 54 passengers 54 passengers * 20 times month= 1080 unit 1080* $175= $189,000 Variable expenses= 70* 1080 number of passengers per month= 75,600 Unit CM= 105 * $113,400 Fixed cost 250,000- 113,400= (-136,600) Decrease in fixed costs expenses.