Southwest Blue Airways provides air transportation services between Seattle and San Diego. A single Seattle to San Diego round-trip flight has the following operating statistics:
Fuel ................... $7,000
Flight crew salaries ............ 5,400
Airplane depreciation ............ 2,600
Variable cost per passenger—business class ..... 50
Variable cost per passenger—economy class .... 40
Round-trip ticket price—business class ..... 550
Round-trip ticket price—economy class .... 290
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. Assume that the overall product is 20% business class and 80% economy class tickets.
(b) How many business class and economy class seats would be sold at the breakeven point?