Acct 552 Case Study 1

Norwalk Express is a luxury passenger carrier in Connecticut. All seats are located in first class, and the following data are available:

Number of seats per passenger train car 70

Average load factor (percentage of seats filled) 80%

Average full passenger fee $ 170

Average variable cost per passenger $ 90

Fixed operating cost per month $ 2,700,000

1. Should the company obtain the route?
2. How many passenger train cars must Norwalk Express operate to earn pre-tax income of $120,000 per month on this route? (Round to the nearest whole number.)
3. If the load factor could be increased to 70 percent, how many passenger train cars must be operated to earn pre-tax income of $120,000 per month on this route? (Round to the nearest whole number.)
4. What qualitative factors should be considered by Norwalk Express in making its decision about acquiring this route?

B. What is the break-even point in passenger cars per month? (Round to the nearest whole number).