Carter Carriage Company offers guided horse- drawn carriage rides through historic Charlotte, North Carolina. The carriage business
Question:
Carter Carriage Company offers guided horse- drawn carriage rides through historic Charlotte, North Carolina. The carriage business is highly regulated by the city. Carter Carriage Company has the following operating costs during April:
Monthly depreciation expense on carriages and stable........................ $ 2,100
Fee paid to the City of Charlotte........................................................... 15% of ticket revenue
Cost of souvenir set of postcards given to each passenger.................. $ 0.85/ set of postcards
Brokerage fee paid to independent ticket brokers (60% of tickets are issued through these brokers; 40% are sold directly by the
Carter Carriage Company)................................................................. $ 1.00/ ticket sold by broker
Monthly cost of leasing and boarding the horses.................................. $ 53,000
Carriage drivers (tour guides) are paid on a per passenger basis......... $ 3.90 per passenger
Monthly payroll costs of non– tour guide employees............................. $ 7,500
Marketing, Website, telephone, and other monthly fixed costs........... $ 7,300
During April (a month during peak season), Carter Carriage Company had 13,040 passengers. Eighty- five percent of passengers were adults ($ 26 fare) while 15% were children ($ 18 fare).
Requirements
1. Prepare the company’s contribution margin income statement for the month of April. Round all figures to the nearest dollar.
2. Assume that passenger volume increases by 20% in May. Which figures on the income statement would you expect to change and by what percentage would they change? Which figures would remain the same as in April?
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer: