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    Break-even point and contribution margin at break-even point

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    Model Transport provides shuttle service between four hotels near a medical center and an international airport.
    A recent month's activity in the form of a cost-volume-profit income statement is shown below:
    Fare revenues (1,440 fares) $57,600 Variable costs Fuel $9,000 Tolls and parking 3,100 Maintenance 2,300 14,400 Contribution margin 43,200 Fixed costs Salaries 15,000 Depreciation 2,000 Insurance 1,000 18,000 Net income $25,200
    (a) Calculate the break-even point in (1) dollars and (2) number of fares. (b) Without calculations, determine the contribution margin at the break-even point.

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    Solution Preview

    (a) Break-even point:
    Contribution margin ratio = Contribution margin / Sales revenue
    = $43,200 / $57,600
    = 75%
    Break-even point in (1) Dollars = Total ...

    Solution Summary

    The solution contains step by step workings to arrive at break-even point and the contribution margin at the break-even point.