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 $7,000 Flight crew salaries 3,200 Airplane depreciation 3,480 Variable cost per passengerbusiness class 140 Variable cost per passengereconomy class 120 Round-trip ticket pricebusiness class 800 Round-trip ticket priceeconomy class 300

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 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