Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection uses two 10 passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost volume profit income statement is shown below.
|
Fare revenues (1,440 fares) |
$36,000 |
|
|
Variable costs |
||
|
Fuel |
$ 5,040 |
|
|
Tolls and parking |
3,100 |
|
|
Maintenance |
500 |
8,640 |
|
Contribution margin |
27,360 |
|
|
Fixed costs |
||
|
Salaries |
13,000 |
|
|
Depreciation |
1,300 |
|
|
Insurance |
1,128 |
15,428 |
|
Net income |
$11,932 |
Instructions
(a) Calculate the break even point in (1) dollars and (2) number of fares.
(b) Without calculations, determine the contribution margin at the break even point.