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		$14,000
Snacks and drinks		800
Landing fees		2,000
Supplies and forms		1,200		18,000
Contribution margin				30,000
Fixed costs
Depreciation		3,000
Salaries		15,000
Advertising		500
Airport hanger fees		1,750		20,250
Net income				$9,750

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

$_______________

2. If fares were decreased by 10% an additional 100 fares could be generated. However, total variable costs would increaase by 20%

a. how much would net income be impacted by this change? Net income decreases/increases to $

b. should the fair be adopted? Yes/No