1.

Break-Even Sales and Sales Mix for a Service Company

Zero Turbulence Airline provides air transportation services between Los Angeles, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics:

Fuel	$8,883
Flight crew salaries	6,804
Airplane depreciation	3,213
Variable cost per passengerbusiness class	50
Variable cost per passengereconomy class	40
Round-trip ticket pricebusiness class	520
Round-trip ticket priceeconomy class	260

It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. If required round the answers to nearest whole number.

a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 20% business class and 80% economy class seats.

Total number of seats at break-even

seats

b. How many business class and economy class seats would be sold at the break-even point?

Business class seats at break-even	seats
Economy class seats at break-even	seats

2.

Margin of Safety

a. If Canace Company, with a break-even point at $409,600 of sales, has actual sales of $640,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number.

1. $

2. %

b. If the margin of safety for Canace Company was 25%, fixed costs were $1,308,750, and variable costs were 75% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break-even in sales dollars first.) $