Competitive contribution margin analysis Johnson Company and Smith Com¬ pany are the two competing firms offering limousine service from the Charles- burg airport. While Johnson pays most of its employees on a per-ride basis, Smith prefers to pay its employees fixed salaries. Information about the cost structures of the two firms is given below:

REQUIRED

(a) Calculate the break-even point in the number of rides for both firms.

(b) Draw two graphs plotting profit as a function of the number of rides for the two firms.

(c) Explain which firm's cost structure is more profitable.

(d) Explain which firm's cost structure is riskier.(LO 8)

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COST CATEGORY Selling price COMPETING LIMOUSINE SERVICE BIDS FROM CHARLESBURG AIRPORT PER RIDE DATA JOHNSON COMPANY SMITH COMPANY $30 $30 24 15 15 Flexible cost Contribution margin 6 Capacity-related costs per year $300,000 $1,500,000