Springfield Express

Submitted By jdstock2003
Words: 737
Pages: 3
Open Document
Case Study 1
Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available:
Number of seats per passenger train car 90
Average load factor (percentage of seats filled) 70%
Average full passenger fare $ 160
Average variable cost per passenger $ 70
Fixed operating cost per month $3,150,000

Formula :
Revenue = Units Sold * Unit price
Contribution Margin = Revenue – All Variable Cost
Contribution Margin Ratio = Contribution Margin/Selling Price
Break Even Points in Units = (Total Fixed Costs + Target Profit )/Contribution Margin
Break Even Points in Sales = (Total Fixed Costs + Target Profit )/Contribution Margin Ratio
Margin of Safety = Revenue - Break Even Points in Sales
Degree of Operating Leverage = Contribution Margin/Net Income
Net Income = Revenue – Total Variable Cost – Total Fixed Cost
Unit Product Cost using Absorption Cost = (Total Variable Cost + Total Fixed Cost)/# of units

a. What is the break-even point in passengers and revenues per month?
Contribution margin per passenger = $160 - $70  $90
Contribution margin ratio= $90/$160  56.25%
Break-even point in passengers = Fixed costs/Contribution Margin =3,150,000/$90
Passengers 35,000 passengers
Break-even point in dollars = Fixed Costs/Contribution Margin Ratio = 3,150,000/56.25%
$5,600,000

b. Compute # of seats per train car (remember load factor?) 90 x 70% = 63 seats
If you know # of BE passengers for one train car and the grand total of passengers, you can compute # of train cars (rounded) =35,000 passengers/63 per train car = 555.55 (or) 556 rounded

c. Contribution margin = $190 - $70  $120
Break-even point in passengers = fixed costs/ contribution margin = 3,150,000/$120  26,250
Passengers =26,250
Train cars (rounded) = 26,250/(90 x 60%) = 26,250/54  486.11 (or) 486 rounded.

d. Contribution margin =$160 - $90 = $70
Break-even point in passengers = fixed costs/contribution margin = $3,150,000/$70 Passengers =45,000 Train cars (rounded) = 45,000/(90 x 70%) = 45,000/63 = 714.3 (or) 714 rounded.

e. Before tax profit less the tax rate times the before tax profit = after-tax income =
After-tax required income = $750,000
Before-tax required income = $750,000/(1 - .30)  $1,071,428.57
Then, proceed to compute # of passengers -= 38,929 rounded (workings below)
New contribution margin = $205 - $85 = $120
Target passengers required = (New fixed costs + Target before-tax profit)/New contribution margin
 ($3,600,000 + $1,071,428.57)/$120  38,928.57 (or) 38,929 passengers rounded.

f. # of discounted seats = (90 x 80%) – (90 x 70%) = 72 – 63 = 9 seats
Contribution margin for discounted fares X# of discounted seats = $ each train X$? train cars per day X ? days per month= $? minus $ additional fixed costs = $?pretax income.

Contribution margin for discounted fares = $120 - $70 = $50
Total contribution margin from discounted fares = $50 per seat x 9 seats = $450 per train car
$450 per train car x 50 train cars per day x 30 days per month =
Show More

Related Documents: Springfield Express

Stategy Key Point Essay

AYN 505 – Sem. 1/2011 BUSINESS STRATEGY ANALYSIS - SEMINAR QUESTIONS – WEEK 2 - KEY POINTS A. Discussion Question 1. In financial analysis, explain why each of the four financial analysis steps (strategy, accounting, financial, and prospective analysis) is critical, and explain how they relate to one another. (PHBWBL p10, Q4 adapted) 2. Your brother, who works in a bank, has recommended to you that you purchase shares in an organisation, on the basis of the following information, which…

Words 2324 - Pages 10

Essay on ARCBS Journal

Journal of Intellectual Capital, Vol. 4 Iss 4 pp. 505-527 http:// dx.doi.org/10.1108/14691930310504536 Carlos Maria F-Jardón, Maria Susana Martos, (2009),"Intellectual capital and performance in wood industries of Argentina", Journal of Intellectual Capital, Vol. 10 Iss 4 pp. 600-616 http:// dx.doi.org/10.1108/14691930910996670 Giovanni Bronzetti, Stefania Veltri, (2013),"Intellectual capital reporting in the Italian non-profit sector: analysing a case study", Journal of Intellectual Capital, Vol. 14 Iss…

Words 8378 - Pages 34

Effect Of Disclosure Level On Cost Of Equity Capital For China Real Estate Enterprises

Effect of Disclosure Level on Cost of Equity Capital for China Real Estate Enterprises BY Yu Fei 0930600146 Accounting Guo Ziqi 0930600035 Accounting A Business Project Submitted to the Division of Business and Management in Partial Fulfilment of the Graduation Requirement for the Degree of Bachelor of Business Administration (Honours) Beijing Normal University – Hong Kong Baptist University United International College April 2013…

Words 7590 - Pages 31

What Problems Did Obama Inherit And Was He Able To Solve Them?

Chapter Study Assignment Exam Two 2305 Chapter 13: The Presidency 1. What “problems” did Obama inherit and was he able to solve them? 481 Ongoing wars in Iraq and Afganistan, continuing fears of terrorism, and the economic woes affecting America and the world. No, he created more problems. 2. What did Lincoln and Roosevelt do in response to a national emergency? How many people were interned by FDR? What did Bush similarly do? 482 In 1862 declaration of martial law and congress in 1863…

Words 3095 - Pages 13

Finance's Role In The Organization

professional accountancy body, ICAEW provides leadership and practical support to over 136,000 members around the world, working with governments, regulators and business to maintain the highest standards. The ICAEW is a founding member of the Global Accounting Alliance with over 775,000 members worldwide. The ICAEW’s Finance and Management Faculty provides its members with up-to-date business ideas; the latest management tools; unbiased and independent information and helps them to become an effective…

Words 5190 - Pages 21

Research Paper On Securities Law

make an informed decision when buying the product – a future stream of earnings. Nearly 84 million Americans (43.6%) of the US own some sort of stock. Institutional (pension funds, mutual funds, commercial banks, insurance companies) own the rest. 1) Assuring Informed Investor Decision-Making & Consumer Protection: Investors need to trust that the company they are investing in is doing the right thing. Securities laws instill trust because the disclosure of information will mean that the investor…

Words 8818 - Pages 36

Essay on surface science

valuable role played by n-octylamine in reducing the capillary pressure responsible for consolidant cracking, and in promoting silica polymerization inside the pores of the non-reactive pure carbonate stone. © 2012 Elsevier B.V. All rights reserved. 1. Introduction Natural stone of diverse types is employed as construction material around the world, for reasons of esthetic appeal and elegance but mainly for its durability. Demand for natural stone is, therefore, usually limited to the more durable…

Words 6464 - Pages 26

Feasibility Study on Organic Fertilizer Essay

CHAPTER 1 THE PROBLEM AND ITS SCOPE Introduction Philippine has been noted to be an agricultural country for the past years and has continually encouraging the appreciation for agricultural economy. Agricultural economy includes the production of healthy foods of which the government gave emphasis through organic fertilizer. Organic fertilizer performs a huge role in the efficiency and effectiveness in the production of food products in the country thus the government continuously finds ways…

Words 17594 - Pages 71

Essay about acc 4435

offers certainty and certainty equals proof. In 1953, the criminologist P.L. Kirk wrote that physical evidence cannot be absent because human witnesses are. It cannot perjure itself; only its interpretation can err. Only human failure to find it, study it, and understand it can diminish its value. The means by which physical evidence becomes proof is through forensic science. It often involves submission of some tangible object that was directly involved in the situation or incident (document…

Words 8538 - Pages 35

1 S2 Essay examples

Lebherz d a b c d Universitat Politècnica de Catalunya • BarcelonaTech, Department of Management. C. Jordi Girona, 1-3, Edifici C5. 08034, Barcelona, Spain Universitat Internacional de Catalunya, Department of Economy and Business Organization. C. Inmaculada, 22, 08017, Barcelona, Spain Universitat Politècnica de Catalunya • BarcelonaTech, Department of Management. C. Jordi Girona, 1-3, Edifici C5. 08034, Barcelona, Spain Karlsruher Institut für Technologie (KIT), Kaiserstraße 12. 76131, Karlsruhe…

Words 9433 - Pages 38