Bristol Car Service offers airport service in a mid-size city. Bristol charges $

Question

Bristol Car Service offers airport service in a mid-size city. Bristol charges $50 per trip to or from the airport. The variable cost for a trip totals $20, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is $4,800. Required: a. How many trips must Bristol sell every month to break even? !trips Break-even point b. Bristol's owner believes that 182 trips is a reasonable forecast of the average monthly demand. What is the margin of safety in terms of the number of airport trips? Margin of safety trips

Explanation / Answer

ans:

a) Break even point = Fixed cost/contribution margin per trip

=4800/50-20

=160Trips

Contribution margin =selling price - veriable cost

b)margin of safety trips=22

Average monthly demand trips - Break even trips

182-160=22trips

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