Comfi 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 Comfi’s base airport to the major city in the state, Metropolis.

Each month, 40 round-trip flights are made. Shown below is a recent month’s activity in the form of a cost-volume-profit income statement.

Fare revenues (400 fares) $48,000 Variable costs Fuel $14,000 Snacks and drinks 800 Landing fees 2,000 Supplies and forms 1,200 18,000 Contribution margin 30,000 Fixed costs Depreciation 3,000 Salaries 15,000 Advertising 500 Airport hangar fees 1,750 20,250 Net income $ 9,750 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, total variable costs would increase by 20%. Should the fare decrease be adopted?

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