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E5-9 Regional Airways, Inc., a small two-plane passenger airline,

Resolved Question:

E5-9 Regional Airways, Inc., a small two-plane passenger airline, has asked for your
assistance in some basic analysis of its operations. Both planes seat 10 passengers each,
and they fly commuters from Regional’s base airport to the major city in the state,
Metropolis. Each month 40 round-trip flights are made. Shown on page 219 is a recent
month’s activity in the form of a cost-volume-profit income statement.
Fare revenues (300 fares) $45,000
Variable costs
Fuel $14,000
Snacks and drinks 800
Landing fees 2,000
Supplies and forms 1,200 18,000
Contribution margin 27,000
Fixed costs
Depreciation 3,000
Salaries 15,000
Advertising 500
Airport hanger fees 1,750 20,250
Net income $ 6,750
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.
(c) If fares were decreased by 10%, an additional 100 fares could be generated. However, variable costs would increase by 35%. Should the fare decrease be adopted?
Submitted: 2 years ago.
Category: Homework
Expert:  Neo replied 2 years ago.
Good day!

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Customer: replied 2 years ago.
I am very confused by the answer. I am trying to understand the assignment and looking at the instructions and the reply they are very confusing.
Expert:  Neo replied 2 years ago.

Please download the answer key HERE.

Thank you so much! :)
Customer: replied 2 years ago.
Neo,
Thank you for the break down, this made so much more sense to me! Thank you for your assistance!
Expert:  Neo replied 2 years ago.
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Experience: BS Accounting
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