Competitive contribution margin analysis Johnson Company and Smith Com¬ pany are the two competing firms offering limousine service from the Charles- burg airport. While Johnson pays most of its employees on a per-ride basis, Smith prefers to pay its employees fixed salaries. Information about the cost structures of the two firms is given below:

REQUIRED

(a) Calculate the break-even point in the number of rides for both firms.

(b) Draw two graphs plotting profit as a function of the number of rides for the two firms.

(c) Explain which firm's cost structure is more profitable.

(d) Explain which firm's cost structure is riskier.(LO 8)

COST CATEGORY Selling price COMPETING LIMOUSINE SERVICE BIDS FROM CHARLESBURG AIRPORT PER RIDE DATA JOHNSON COMPANY SMITH COMPANY $30 $30 24 15 15 Flexible cost Contribution margin 6 Capacity-related costs per year $300,000 $1,500,000