Question

Kaiser Air is considering a new flight between Atlanta and Tampa. The average fare per seat is $400. The fixed costs for the flight, which include crew salaries, operating costs, and aircraft depreciation, total $32,000. Variable costs per passenger total $75. The break-even number of passengers per flight is a.427 b.80 c.98 d.5

Answer 1

The break-even number of passengers per flight is c.98

Explanation:

Given:

Average fare per seat= $400

Fixed costs for the flight= $32,000

Variable costs per passenger= $75

Break-even number of passengers per flight= Fixed cost / Contribution margin per passenger

Contribution margin per passenger= 400-75

So, break-even number of passenger per flight= 32,000 / (400-75)

                                                                                 = 32,000/325

                                                                                 = 98

The break-even number of passengers per flight is c.98

The correct option is C.