ACCT 505 Course Great Wisdom / tutorialrank.com ACCT 505 Course Great Wisdom / tutorialrank.com | Page 13

month? If Springfield Express raises its average passenger fare to $
190, it is estimated that the average load factor will decrease to 60
percent. What will be the monthly break-even point in number of
passenger cars? (Refer to original data.) Fuel cost is a significant
variable cost to any railway. If crude oil increases by $ 20 per barrel,
it is estimated that variable cost per passenger will rise to $ 90. What
will be the new break-even point in passengers and in number of
passenger train cars? Springfield Express has experienced an increase
in variable cost per passenger to $ 85 and an increase in total fixed
cost to $ 3,600,000. The company has decided to raise the average
fare to $ 205. If the tax rate is 30 percent, how many passengers per
month are needed to generate an after-tax profit of $ 750,000? (Use
original data). Springfield Express is considering offering a
discounted fare of $ 120, which the company believes would increase
the load factor to 80 percent. Only the additional seats would be sold
at the discounted fare. Additional monthly advertising cost would be $
180,000. How much pre-tax income would the discounted fare
provide Springfield Express if the company has 50 passenger train
cars per day, 30 days per month? Springfield Express has an
opportunity to obtain a new route that would be traveled 20 times per
month. The company believes it can sell seats at $ 175 on the route,
but the load factor would be only 60 percent. Fixed cost would
increase by $ 250,000 per month for additional personnel, additional
passenger train cars, maintenance, and so on. Variable cost per
passenger would remain at $ 70. Should the company obtain the
route? How many passenger train cars must Springfield Express
operate to earn pre-tax income of $ 120,000 per month on this route?
If the load factor could be increased to 75 percent, how many
passenger train cars must be operated to earn pre-tax income of $
120,000 per month on this route? What qualitative factors should be
considered by Springfield Express in making its decision about
acquiring this route?