Without calculations, determine the contribution margin at the break-even point.
Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below.
Fare revenues (1,440 fares)
$36,000
Variable costs
Fuel
$ 5,040
Tolls and parking
3,100
Maintenance
500
8,640
Contribution margin
27,360
Fixed costs
Salaries
13,000
Depreciation
1,300
Insurance
1,128
15,428
Net income
$11,932
Instructions
(a) Calculate the break-even point in (1) dollars and (2) number of fares.
(b) Without calculations, determine the contribution margin at the break-even point.