Question
GableGable Company and StenbackStenback Company are competing firms that offer limousine service from the SeattleSeattle airport. While GableGable pays most of its employees on a
GableGable Company and StenbackStenback Company are competing firms that offer limousine service from the SeattleSeattle airport. While GableGable pays most of its employees on a per-ride basis, StenbackStenback prefers to pay its employees fixed salaries. Information about the selling prices per ride and cost structures of the two firms is given below.
Requirements
| (a) | Calculate the breakeven point in the number of rides for both firms. |
| (b) | Draw two graphs plotting profit as a function of the number of rides for the two firms. |
| (c) | Explain which firm's cost structure is more profitable. |
| (d) | Explain which firm's cost structure is riskier. |
|
|
| / |
| = | Breakeven point |
| Gable |
| / |
| = |
|
| Stenback |
| / |
| = |
|
Cost Category
Gable Company
Stenback Company
Selling price per ride
$28
$28
Variable cost per ride
22
18
Contribution margin per ride
6
10
Fixed costs per year
$270,000
$650,000
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Agile Project Management Assurance And Auditing A Practical Guide For Auditors Reviewers And Project Teams
Authors: Wright Christopher
1st Edition
1787783553, 978-1787783553
