Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airline pro
ID: 2556493 • Letter: B
Question
Break-Even Sales and Sales Mix for a Service Company
Zero Turbulence Airline provides air transportation services between Los Angeles, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics:
It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. If required round the answers to nearest whole number.
a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 10% business class and 90% economy class seats.
b. How many business class and economy class seats would be sold at the break-even point?
Fuel $6,392 Flight crew salaries 4,896 Airplane depreciation 2,312 Variable cost per passenger—business class 45 Variable cost per passenger—economy class 35 Round-trip ticket price—business class 515 Round-trip ticket price—economy class 285Explanation / Answer
Weighted average contributin margin per unit = (515-45*10%+285-35*90%) = 272 per unit
a) Break even point units = 13600/272 = 50 seats
b) Business class seats at break-even = (50*10%) = 5 seats
Economy class seats at break-even = (50*90%) = 45 seats