Question 8

Basubiya bus services provided transport services to the general public four days per week. Its services include trips from Gaborone to Kazungula Bridge. If the bus is not fully booked passengers who drops off in Nata and Kasane are allowed to board but on the uniform fee. The following are variable costs per trip:

$

Wi-Fi 10.00

Lunch and snacks 15.00

The fixed costs per trip are as follows

Salary- bus driver 560

Salary conductor 640

Fuel 3,500

Insurance 250

Basubiya bus services charges each passenger $190 per trip.

Required

i. Calculate contribution margin and contribution in sales value. [3 marks]

ii. Determine the number passengers required to board the bus in order to breakeven. Calculate the breakeven in sale value [3 marks]

iii. If the bus company targets operating profit of $4,125 per trip, compute the number of passengers who should board the bus per trip. [3 marks]

iv. The fuel prices increase during the month of September, now each trip requires to fill up the tanks with $4,250 for each trip. The shareholders also employed a bus inspector who will be paid $240 per trip. Calculate the new bus fare per passenger to meet the target operating profit assuming the same number of passengers as in item (C) above.