Compute peyton travel break-even sales in dollars


The following are the monthly fixed expenses for Peyton Travel:

Office rent:                               $3,000.00
Depreciation of office furniture        200.00
Utilities                                          110.00
Telephone                                      520.00
Reservation Service Fees                 380.00
Travel Agent Salaries                    1,400.00

Variable expenses include the following:

Travel Agent Commission 5.0% of sales

Advertising                                                       6.0% of sales
Supplies and Postage                                         1.0% of sales
Telephone and Reservation Service usage fees    3.0% of sales

a) Use the contribution margin ratio CVP formula to compute Peyton Travel's break-even sales in dollars. If the average sales price of a ticket is $660.00; how many tickets must be sold to reach break-even?

b) Use the income statement equation [revenue - (variable expense + fixed expense) = operating income] to compute the dollar sales needed to earn a target monthly operating income of $6,290.00. How many tickets is this if the average sales price of a ticket is $660.00?

c) Assume the average sales price decreases to $440.00 per ticket. Use the contribution margin approach to compute Peyton Travel's new break-even point in tickets sold. How does this compare to your answer in part a)?

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Finance Basics: Compute peyton travel break-even sales in dollars
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