Break-Even Sales and Sales Mix for a Service Company
Zero Turbulence Airline provides air transportation services between Los Angeles, California, and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics:
Fuel $7,000
Flight crew salaries 3,200
Airplane depreciation 3,480
Variable cost per passenger—business class 140
Variable cost per passenger—economy class 120
Round-trip ticket price—business class 800
Round-trip ticket price—economy class 300
It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight.
a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product mix is 10% business class and 90% economy class tickets.
Total number of seats at break-even seats
b. How many business class and economy class seats would be sold at the break-even point?
Business class seats at break-even seats
Economy class seats at break-even seats