Datsun Kars provides shuttle service between four hotels near a medical center and an...

Question:

Datsun Kars provides shuttle service between four hotels near a medical center and an international airport. Datsun Kars 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 ( 1,500 fares) $ 36,000
Variable costs
Fuel $ 5,040
Tolls and parking 3,100
Maintenance 860 9,000
Contribution margin 27,000
Fixed costs
Salaries 15,700
Depreciation 1,300
Insurance 1,000 18,000
Net income $ 9,000

1. Calculate the break-even point in dollars.

Break-even point $ _

2. Calculate the break-even point in number of fares.

(Round answer to 0 decimal places, e.g. 5,275.)

Break-even point fares

3. Without calculations, determine the contribution margin at the break-even point.

Contribution margin at the break-even point $ _

Breakeven Analysis

Breakeven analysis is a management accounting tool that uses a company's cost, volume, and profit in order to create sound business decisions.

Answer and Explanation:

1. Breakeven point in dollars is calculated by using the formula below:

  • BEP in dollars = Fixed costs / Contribution margin ratio

Contribution margin...

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How to Calculate the Break-Even Point - Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 28
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