1. ABC Passenger Service Airlines has determined the breakeven point, both in dollars and passengers, necessary to breakeven. Explain how an increase or decrease of passengers from the breakeven point would affect the profit or loss of the firm.
2. You are a management analyst for XYZ aircraft manufacturing company. Your company currently manufactures and sells four different types of aircraft. Historically, each aircraft type constitutes 25% of the total revenue. For each aircraft type the unit contribution margin, expressed as a per cent of sales, is different. If this year the sales mix is different than the historical average, explain what affect this would have on the breakeven point?
3. Two companies have the same fixed expenses, unit variable expense, and profits. However, one company sells its products for a lower price. Explain what might be the reason(s) they do this?
4. Answer the following below: Build an Excel Spreadsheet and complete requirements 1 and 3. The spreadsheet must accompany the submission.
SkiCo. Inc manufactures ski boots. The company's projected income for the coming year, based on sales of 160,000 units, is as follows:
Sales ......................................................................$16,000,000
Operating expenses:
Variable expenses............$4,000,000
Fixed expenses.................. 6,000,000
Total expenses................................................10,000,000
Net income..........................................................$ 6,000,000
Required: In completing the following requirements, ignore income taxes.
1. Prepare a CVP graph for Ski Co, Inc., for the coming year.
2. What is the company's margin of safety for the year?