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.
(a) Break-even point:
Contribution margin ratio = Contribution margin / Sales revenue
= $43,200 / $57,600
Break-even point in (1) Dollars = Total ...
The solution contains step by step workings to arrive at break-even point and the contribution margin at the break-even point.