(a)
Break-Even Point:
The break-even point is a point where total cost incurred are the same as the total revenue earned. At the break-even point the profit will be zero. The break-even point is the point in the business where there is no loss and no gain.
(1)
To Calculate: The break-even point in dollars.
(2)
Break-Even Point:
The break-even point is a point where total cost incurred are the same as the total revenue earned. At the break-even point the profit will be zero. The break-even point is the point in the business where there is no loss and no gain.
To Calculate: The break-even point in number of passenger flights.
(b)
Contribution Margin Ratio:
The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.
To Determine: The contribution margin at the break-even point.
(c)
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
To Determine: Whether the decrease in the ticket price should be adopted.
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Chapter 6 Solutions
Managerial Accounting: Tools for Business Decision Making
- Resling Travel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of its six helicopters makes between 1,300 and 2,300 round-trips per year. The records indicate that a helicopter that has made 1,300 round-trips in the year incurs an average operating cost of $600 per round-trip, and one that has made 2,300 round-trips in the year incurs an average operating cost of $450 per round-trip. Read the requirements. Requirement 1. Using the high-low method, estimate the linear relationship y = a +bX, where y is the total annual operating cost of a helicopter and X is the number of round-trips it makes to JFK airport during the year. Requirements 1. Using the high-low method, estimate the linear relationship y= a +bX, where y is the total annual operating cost of a helicopter and X is the number of round-trips it makes to JFK airport during the year. Give examples of costs that would be included in a and in b. 2. 3. If Resling Travel…arrow_forwardE6.4 (LO 1), AP Service Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi's base airport to the major city in the state, Metropolis. Each month, 40 round-trip flights are made. The following is a recent month's activity in the form of a cost-volume-profit income statement. Fare revenues (400 passenger flights) Variable costs Fuel Snacks and drinks Landing fees Supplies and forms Contribution margin Fixed costs Depreciation Salaries Advertising Airport hangar fees Net income $14,000 800 2,000 1,200 3,000 15,000 500 1,750 $48,000 18,000 30,000 20,250 $ 9,750 Instructions a. Calculate the break-even point in (1) sales dollars and (2) number of passenger flights. b. Without calculations, determine the contribution margin at the break-even point. c. If ticket prices were decreased by 10%, passenger flights would increase by 25%. However,…arrow_forwardRadig Travel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of its fourteen helicopters makes between 1,100 and 2,200 ​round-trips per year. The records indicate that a helicopter that has made 1,100 ​round-trips in the year incurs an average operating cost of $500 per​ round-trip, and one that has made 2,200 ​round-trips in the year incurs an average operating cost of $400 per​ round-trip.  Read the requirements LOADING... .  Requirement 1. Using the​ high-low method, estimate the linear relationship y=a+bX​, where y is the total annual operating cost of a helicopter and X is the number of​ round-trips it makes to JFK airport during the year.   =  +   Requirement 2. Give examples of costs that would be included in a and in b.  Begin by selecting which type of costs ​"a​" and ​"b​" ​represent, then select the costs that correlate with that cost​ type, use each cost only once.…arrow_forward
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- McCafe Inc.has built a separate car parking area having parking space of 1,000 cars.$1/hour is charged for each car as parking fee whereas, the parking area operates for 2,600 hours/year. Normally, customers use the parking area as an average fortwo hours. McCafe has rented this parking area for $7,500/month from a construction company There arefive employees who look after the parking area who are paid for 50 weeks; $350/week. These employees are allowed two-week holidaysand an additional compensation of $600are paidto each employee duringthese holidays. All five employees work during the months when traffic load is high whereas, four employees handle all the matters when traffic load is lesser. The overall workload is managed byaManager who is paid $25,000/year. Maintenance and other operating costs of parking area include fixed costs of $2,500 per month whereas 7cents/parking-space/hour is included in variable cost.Required:(i) Calculate the annual break-even point in dollars (Car…arrow_forwardReisen Travel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of its 10 helicopters makes between 1,000 and 2,000 round-trips per year. The records indicate that a helicopter that has made 1,000 round-trips in the year incurs an average operating cost of $350 per round-trip, and one that has made 2,000 round-trips in the year incurs an average operating cost of $300 per round-trip. Q. Using the high-low method, estimate the linear relationship y = a + bX, where y is the total annual operating cost of a helicopter and X is the number of round-trips it makes to JFK airport during the year.arrow_forwardTravel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of its 10 helicopters makes between 1,000 and 2,000 ​round-trips per year. The records indicate that a helicopter that has made 1,000 ​round-trips in the year incurs an average operating cost of ​$350 per​ round-trip, and one that has made 2,000 ​round-trips in the year incurs an average operating cost of ​$300 per​ round-trip.  Read the requirements LOADING... .  Requirement 1. Using the​ high-low method, estimate the linear relationship y=a+bX​, where y is the total annual operating cost of a helicopter and X is the number of​ round-trips it makes to JFK airport during the year.arrow_forward
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