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Springfield 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
90
Average load factor (percentage of seats
filled)
70%
Average full passenger fare
$160
Average variable cost per passenger
$70
Fixed operating cost per month
$3,150,000
What is the break-even point in passengers
and revenues per month? What is the break-even point in number of passenger
train cars per 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?
Grading Rubric for Case
Study II:
Category
Points
%
Description
Documentation & Formatting
5
11%
Case Study will be completed in Word or
Excel and contain necessary formulas to receive maximum credit
Organization & Cohesiveness
5
11%
Calculations for all parts should be
organized and correctly labeled. In a quality case study, all questions should
be addressed in a clear, concise manner.
Editing
5
11%
Quality work will be free of any spelling,
punctuation or grammatical errors. Sentences and paragraphs ( where
appropriate) will be clear, concise and factually correct
Content
30
67%
A quality project will have all of the
required work completed and will be correct.
Total
45
100%
A quality project will meet or exceed all
of the above requirements.
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