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$15,848

Flight crew salaries12,139

Airplane depreciation5,733

Variable cost per passengerbusiness class65

Variable cost per passengereconomy class50

Round-trip ticket pricebusiness class535

Round-trip ticket priceeconomy class310

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.

a. Compute the break-even number of seats sold on a single round-trip flight for the overall enterprise product, E. Assume that the overall product mix is 10% business class and 90% economy class tickets.

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