Kangaroo Airlines in small local carrier located in the Kimberly region of Western Australia. All seats are economy class and the following data is available:
|
Number of seats per plane
|
120
|
|
Average load factor (percentage of seats filled)
|
75%
|
|
Average full passenger fare
|
$70
|
|
Average variable cost per passenger
|
$30
|
|
Fixed operating costs per month
|
$1,200,000
|
1. What is the break-even point in number of passengers per month?
2. What is the break-even point in sales revenue dollars per month?
3. What is the break-even point in number of flights per month (round up)?
4. If Kangaroo Airline currently has on average 40,000 passengers per month what is Kangaroo Airline's margin of safety in number of passengers?
5. If Kangaroo Airlines raises its average full passenger fare to $85 and the average variable costs per passenger will remain at $30, it is estimated that the load factor will decrease to 60 percent. What will be the break-even point in number of flights (round up)?
6. The cost of aviation fuel is a significant variable cost to any airline. If fuel charges increase by $8 per barrel, it is estimated that variable cost per passenger will increase to $40 however that average full passenger fare will remain at the original $70 per passenger as will the original load factor of 75 percent. What will be the new break-even point in number of passengers?
7. The cost of aviation fuel is a significant variable cost to any airline. If fuel charges increase by $8 per barrel, it is estimated that variable cost per passenger will increase to $40 however the average full passenger fare will remain at the original $70 per passenger as will the original load factor of 75%. What will be the new break-even point in number of passengers? What will be the new break-even point in number of flights (round up)?
8. Kangaroo Airlines has experienced an increase in average variable cost per passenger to $35 and an increase in fixed costs to $1,500,000. Kangaroo Airlines has decided to increase the average full passenger fare to $80. How many of passengers are needed to generate an after-tax profit of $400,000, if the company tax rate is 30 percent (round up)?
9. Kangaroo Airlines is considering offering a discounted fare of $50 with the average variable costs per passenger remaining at the original $30 per passenger, Kangaroo feels that the discounted fare would increase the load factor from 75 percent to 80 percent. Only the additional seats arising from the increase in the load factor would be sold at the discounted fare. Additional monthly advertising costs promoting the discounted fares would be $80,000. How much pre-tax profit per month would the discounted fare provide Kangaroo Airlines if the company has 40 flights per day, 30 days per month?
10. Kangaroo Airlines has an opportunity to obtain a new route. The company feels it can sell seats at an average full passenger fare of $75 on the new route, but the load factor would be only 60 percent. The company will fly the new route 15 times per month. The increase in fixed costs for the additional crew, additional planes, landing fees, maintenance, etc., would total $100,000 per month. Variable costs per passenger would remain at $30. Should Kangaroo Airlines obtain the route? In the on-line form, if you think that Kangaroo Airlines should obtain the new route answer True and if you think that Kangaroo Airlines should not obtain the route answer False.
11. Using the information in question 10, how many flights would Kangaroo Airlines need to earn a pre-tax profit of $50,500 per month on this new route (round up)?
12. Using the information in question 10, how many flights would be needed to earn a pre-tax profit of $50,500 per month on this route if the load factor increased to 75 percent (round up)?
Kangaroo Airlines
Kangaroo Airlines in small local carrier located in the Kimberly region of Western Australia. All seats are economy class and the following data is available:
|
Number of seats per plane
|
120
|
|
Average load factor (percentage of seats filled)
|
75%
|
|
Average full passenger fare
|
$70
|
|
Average variable cost per passenger
|
$30
|
|
Fixed operating costs per month
|
$1,200,000
|
1. What is the break-even point in number of passengers per month?
2. What is the break-even point in sales revenue dollars per month?
3. What is the break-even point in number of flights per month (round up)?
4. If Kangaroo Airline currently has on average 40,000 passengers per month what is Kangaroo Airline's margin of safety in number of passengers?
5. If Kangaroo Airlines raises its average full passenger fare to $85 and the average variable costs per passenger will remain at $30, it is estimated that the load factor will decrease to 60 percent. What will be the break-even point in number of flights (round up)?
6. The cost of aviation fuel is a significant variable cost to any airline. If fuel charges increase by $8 per barrel, it is estimated that variable cost per passenger will increase to $40 however that average full passenger fare will remain at the original $70 per passenger as will the original load factor of 75 percent. What will be the new break-even point in number of passengers?
7. The cost of aviation fuel is a significant variable cost to any airline. If fuel charges increase by $8 per barrel, it is estimated that variable cost per passenger will increase to $40 however the average full passenger fare will remain at the original $70 per passenger as will the original load factor of 75%. What will be the new break-even point in number of passengers? What will be the new break-even point in number of flights (round up)?
8. Kangaroo Airlines has experienced an increase in average variable cost per passenger to $35 and an increase in fixed costs to $1,500,000. Kangaroo Airlines has decided to increase the average full passenger fare to $80. How many of passengers are needed to generate an after-tax profit of $400,000, if the company tax rate is 30 percent (round up)?
9. Kangaroo Airlines is considering offering a discounted fare of $50 with the average variable costs per passenger remaining at the original $30 per passenger, Kangaroo feels that the discounted fare would increase the load factor from 75 percent to 80 percent. Only the additional seats arising from the increase in the load factor would be sold at the discounted fare. Additional monthly advertising costs promoting the discounted fares would be $80,000. How much pre-tax profit per month would the discounted fare provide Kangaroo Airlines if the company has 40 flights per day, 30 days per month?
10. Kangaroo Airlines has an opportunity to obtain a new route. The company feels it can sell seats at an average full passenger fare of $75 on the new route, but the load factor would be only 60 percent. The company will fly the new route 15 times per month. The increase in fixed costs for the additional crew, additional planes, landing fees, maintenance, etc., would total $100,000 per month. Variable costs per passenger would remain at $30. Should Kangaroo Airlines obtain the route? In the on-line form, if you think that Kangaroo Airlines should obtain the new route answer True and if you think that Kangaroo Airlines should not obtain the route answer False.
11. Using the information in question 10, how many flights would Kangaroo Airlines need to earn a pre-tax profit of $50,500 per month on this new route (round up)?
12. Using the information in question 10, how many flights would be needed to earn a pre-tax profit of $50,500 per month on this route if the load factor increased to 75 percent (round up)?