Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfis base airport to the major city in the state, Metropolis. 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 passenger flights)				$48,000
Variable costs
Fuel		$16,084
Snacks and drinks		740
Landing fees		2,000
Supplies and forms		1,000		19,824
Contribution margin				28,176
Fixed costs
Depreciation		2,950
Salaries		13,884
Advertising		400
Airport hanger fees		1,550		18,784
Net income				$9,392

(a1)

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Calculate the break-even point in dollars.

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(a2)

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Calculate the break-even point in number of passenger flights.

Break-even point

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flights

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(b)

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Without calculations, determine the contribution margin at the break-even point.

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(c)

If ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase by the same percentage as passenger flights. (1) How much would net income be impacted by this change?

Net income increasesdecreases to $

(2) Should the ticket price decrease be adopted? NoYes

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