Managerial Accounting 505 Case Study Week 3

Grade 45/50 Managerial Accounting 505 shimmy Study Week 3 A. What is the break-even point in riders and revenues per month? hit Per UnitPercent Sales 160 X 90 $14,400$ 160 snow% Less varying apostrophize/expenses . 70 X 90 $ 6,300 $7044% character margin $ 8,100$9056% Less set(p) costs/expense $3,150,000 Net operating income $3,141,900 8,100 /14,400 = 56% 100 56 = 44% BEP in passengers ( furbish up costs / share margin) 3,150,000 / 90 = 35,000 passengers BEP in dollars (passenger per month X selling price) 35,000 X 160 = 5,600,000 B.What is the break-even point in routine of passenger contain gondolas per month? of sit per passenger train cars X Average misdirect broker BEP in passengers car per month 35,000/ (90x. 70) 35,000/ 63 = 556 passenger train per month C. If capital of Illinois declare raises its average passenger get to $190, it is estimated that the average consign mover forget decrease to 60%. What depart be the periodic break-even point in number of passenger cars? Total Per UnitPercent Selling Price $17,100$190100 Less shifting costs/expense$6,300$70 37 Contribution margin$10,800$12063 BEP in passengers ( heady cost / unit cm ) 3,150,000 / 120 = 26,250BEP in passengers per month in dollars (fixed costs / cm ratio) 3,150,000 / . 63 = 5,000,000 of seats per passenger train cars X Average load factor 90 X . 60 = 54 BEP of passengers cars 26,250 / (90 X . 60) 54 = 486 passengers train cars per month D. Refer to original data. ) discharge cost is a signifi sack upt variable cost to any railway. If tender oil gains by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the bracing break-even point in passengers and in number of passenger train cars? BEP in passengers laid operating cost / role margin 3,150,000/ 70 = 45,000 passengers per month BEP of passengers per car 90x. 70 = 63 passenger per car Passengers per month/passenger train cars 45,000/63= 714 passenger train car s per month E. capital of Illinois Express has experienced an increase in variable cost per passenger to $ 85 and an increase in nitty-gritty fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the evaluate rate is 30 percent, how many another(prenominal) passengers per month are unavoidable to generate an after-tax profit of $ 750,000? Before tax profit = after-tax profit /100%-tax rate % 750,000/(1. 00-. 30)= $1,071,429Before tax profit + fixed cost/New contribution margin $,1,071,429 + $3,600,000/($205-$85) = $4,671,429/$120 = 38928. 56 or 38,929 passenger per month. 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 interchange at the discounted fare. extra monthly advertising cost would be $ 180,000. How a good deal pre-tax income would the discounted fare volunteer Springfield Expre ss if the company has 50 passenger train cars per sidereal day, 30 days per month?Revenue= 90 x (. 80-. 70) x 120 x 50 x 30 + $180,000 = $1,800,000 inconsistent cost= $70 x ($1,800,000/discount fare ($120) = 1,050,000 Additional monthly advertising cost = $180,000 Revenue$1,800,000 Less protean cost($1,050,000) Contribution allowance $750,000 Less Advertising cost ($180,000) Pretax income discount fare provide.. $570,000 f of discounted seats = 90 X . 0 = 9 seats Contribution margin for discounted fares = $ 120 $ 70 = $ 50 X 9 discounted seats = $450 each train X 50 train cars per day X 30 days per month= $ 675,000 minus $ 180,000 additional fixed costs = $ 495,000 pretax income. G. Springfield Express has an opportunity to obtain a new passage 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. uncertain cost per passenger would remain at $ 70. 1. Should the company obtain the route? Revenue= 90 x (. 6) X $17520= $189,000 Variable cost= $70 x ($189,000/ fare ($175) = $75,600 Additional monthly Fixed cost = $250,000 Revenue$189,000 Less Variable cost($75,600) Contribution Margin $113,400 Less Fixed cost.. ($250,000) Pretax income loss. $136,000) The company should not go for the new route because they will lose money because the Total Additional Contribution Margin is not Additional Fixed Costs 2. How many passenger train cars must(prenominal) Springfield Express operate to take up pre-tax income of $ 120,000 per month on this route? Before tax profit + fixed cost/Contribution margin $120,000+$250,000 / ($175-$70) = 3,523. 81 or 3524 of seats per passenger train cars X Average load factor 90 X . 0 = 54 Passengers per month/passenger train cars 3524/54 = 65. 25 or 65 passenger train cars ask 3. If the load factor could be i ncrease to 75 percent, how many passenger train cars must be operated to earn pre-tax income of $ 120,000 per month on this route? Before tax profit + fixed cost/Contribution margin $120,000+$250,000/($175-$70) = 3,523. 81 or 3524 of seats per passenger train cars X Average load factor 90 X . 5 = 67. 50 Passengers per month/passenger train cars 3524/67. 50 = 52. 20 or 52 passenger train cars needed 4. What qualitative factors should be considered by Springfield Express in make its decision about acquiring this route? If fixed cost increased to $500,000 Fixed cost (25,000 X 2) = $500,000 = fixed cost + required profit)/contribution margin per seat = (500000 + 120000) / 61 = 62,0000 / 61 = 10164 SeatsSeat price average (131*10164) 1331484 Variable cost (70*10164) 711480 Contribution 620004 Fixed cost 500000 Income Fixed cost variable cost, contribution margin income loading factors should be considered before taking decision. 4. Springfield should consider such things as Connections to other Springfield trains that might be made by these passengers. Long-range potential for increased load factors change magnitude customer goodwill in this new market Increased physical exercise opportunities for labor in the area Competition in the market. 120004