Fly-by-Night Airways provides air transportation servicesbetween New York and Mi
ID: 2457791 • Letter: F
Question
Fly-by-Night Airways provides air transportation servicesbetween New York and Miami. A single New York to Miamiround-trip has the following operating statistics:
Fuel 3,540
Flight crewsalaries 7,310
Airplanedepreciation 2,995
Variable cost per passenger – businessclass 45
Variable cost per passenger – touristclass 35
Round – trip ticket price – businessclass 350
Round – trip ticket price – touristclass 225
It is assumed that the fuel, crew salaries, and airplanedepreciation are fixed, regardless of the number of seats sold forthe round – trip flight.
Note: a. 65seats
Explanation / Answer
1. Break even number of seats for a round trip. Fixed costs weighted averagecontribution margin Fixed costs Fuel 3,540 salaries 7,310 Deprec. 2,995 13,845 Contribution margin sales variablecost CM percentage weighted average CM Business class 350 45 305 x 20% 61 Tourist class 225 35 190 x 80% 152 213 Plug in the value in the formula 13,845 213 = 65seats. B. No of business class and tourist class seats at breakeven B- class - 65 * 20 % = 13 seats. T - class 65 * 80 % = 52 seats.