Break-Even Analysis Question: Atlas Airlines Inc. is a small two-plane passenger airline. They have asked for your assistance in some basic analysis of their operations. Both planes seat 10 passengers each, flying commuters on a daily basis from a major city. Each month 40 round trip flights are made. Shown below is a recent months activity in the form of a cost-volume-profit income statement.

Fare revenues (400 fares) $50,000 Variable Costs:

Fuel $17,900

Snacks & drinks 1,400 Landing Fees 2,000

Supplies 1,200 22,500

Contribution Margin 27,500 Fixed Costs:

Depreciation 3,000 Salaries 15,000 Advertising 2,250

Hanger fees 1,750 22,000 Operating Income: $ 5,500

Required:

A) Calculate the break-even point in Dollars B) Calculate the break-even point in Units

C) If the fares were decreased by 10%, an additional 80 fares could be generated. However,

total variable costs would increase by 20%. Should the fare decrease be adopted?

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