break even point in flights

Assignment 1 CVP Comprehensive Problem Gupta Travel is a charter airline service for corporate clients traveling between Atlanta and Boston. The company leases one jet aircraft and flies an average of 150 one-way trips per year Gupta's marketing strategy is to sell a more enjoyable travel experience than its rivals in the mmercial airline industry. Gupta arranges ground transportation in Atlanta and Boston for its clients, offers a more spacious cabin with larger seats and more legroom, and serves gourmet meals on its flights. Gupta does not sell its services to individuals; rather its services are marketed directly to corporate clients. Therefore, when Gupta books a flight for a client, it is not merely selling a few seats on its aircraft. Rather, the corporate client is booking the use of the aircraft for its travel needs. Gupta uses a network of commissioned travel agents to sell its services These agents are not employees ofGupta, and the agents receive a 20 percent commission (no fixed salary) on each flight sold on Gupta Travel Gupta had the following income statement for the year ending December 31.2016 Gupta Travel Income Statement For the Year Ending 12/31/2016 Sales Revenue (150 one-way flights $40,000 per flight) $6,000,000 Commissions Expense (20 percent of Sales Revenue) S1,200,000 Annual Lease Expense Airplane $1,100,000 Annual Fee for Airport Ground Crew Services $800,000 Flight Crew Expense (150 one-way flights $1,500 per flight) $225,000 Fuel Expense (150 one-way flights $1,000 per flight) $150,000 Food Expense (50 one-way flights S800 per flight $120,000 Ground Transportation Expense (150 one-way flights S200 per flight) $30,000 Other Fixed General and Administrative Expenses $200,000 Fixed Interest Expense $220,000 (1) Prepare the contribution margin Income Statement( ignore income tax (2) What is Gupta's current breakeven point in flights? (3) At the end of 2016, Gupta's management learned that its commissioned travel agents are demanding an increase in their commission rate to 30 percent per flight for the upcoming ear. As a result, Gupta's president has decided to investigate the possibility of hiring an in-house sales staff to replace the commissioned travel agents. Gupta's accounting department compiled the following information to be used to evaluate the cost of establishing an in-house sales department