Case Study 1Springfield 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 90Average load factor (percentage of seats filled) 70%Average full passenger fare $ 160Average variable cost per passenger $ 70Fixed operating cost per month $3,150,000Formula :Revenue = Units Sold * Unit priceContribution Margin = Revenue – All Variable CostContribution Margin Ratio = Contribution Margin/Selling PriceBreak Even Points in Units = (Total Fixed Costs + Target Profit )/Contribution MarginBreak Even Points in Sales = (Total Fixed Costs + Target Profit )/Contribution Margin RatioMargin of Safety = Revenue – Break Even Points in SalesDegree of Operating Leverage = Contribution Margin/Net IncomeNet Income = Revenue – Total Variable Cost – Total Fixed CostUnit Product Cost using Absorption Cost = (Total Variable Cost + Total Fixed Cost)/# of unitsa. Contribution margin per passenger =?Contribution margin ratio =?Break-even point in passengers = Fixed costs/Contribution Margin = Passengers =?Break-even point in dollars = Fixed Costs/Contribution Margin Ratio =$ ?b. Compute # of seats per train car (remember load factor?)If you know # of BE passengers for one train car and the grand total of passengers, you can compute # of train cars (rounded) =?c. Contribution margin =?Break-even point in passengers = fixed costs/ contribution margin Passengers =? train cars (rounded) =?d. Contribution margin =?Break-even point in passengers = fixed costs/contribution margin Passengers =? train cars ( rounded) = ?e. Before tax profit less the tax rate times the before tax profit = after-tax income = $ ?Then, proceed to compute # of passengers -=? f. # of discounted seats = ?Contribution margin for discounted fares X # discounted seats = $ each train X$ ? train cars per day X ? days per month= $? minus $ additional fixed costs = $? pretax income.g. 1.Compute Contribution marginThen,# seats X $ X # train cars = $ ?Increased fixed cost ( ?)Pretax gain (loss) on new route $2 and 3. Compute # of passengers and train cars using computation approaches employed in some of the above problems. 4. Springfield should consider such things as (Think of qualitative factors that are important. In other words, not the numbers but other things that have to be considered, e.g., risks)
