Case Study 1 Springfield Express is a luxury passenger carrier in Texas.

All seats are first class, and the following data are available:
u!ber of seats per passenger train car Average load factor $percentage of seats filled% Average full passenger fare Average variable cost per passenger *ixed operating cost per !onth "# &#' ( 1)# ( &# (+,1,#,###

a. -hat is the brea./even point in passengers and revenues per !onth0 b. -hat is the brea./even point in nu!ber of passenger train cars per !onth0 c. 1f Springfield Express raises its average passenger fare to ( 1"#, it is esti!ated that the average load factor will decrease to )# percent. -hat will be the !onthly brea./even point in nu!ber of passenger cars0 d. $2efer to original data.% *uel cost is a significant variable cost to any railway. 1f crude oil increases by ( 3# per barrel, it is esti!ated that variable cost per passenger will rise to ( "#. -hat will be the new brea./even point in passengers and in nu!ber of passenger train cars0 e. Springfield Express has experienced an increase in variable cost per passenger to ( 4, and an increase in total fixed cost to ( +,)##,###. The co!pany has decided to raise the average fare to ( 3#,. 1f the tax rate is +# percent, how !any passengers per !onth are needed to generate an after/tax profit of ( &,#,###0 f. $5se original data%. Springfield Express is considering offering a discounted fare of ( 13#, which the co!pany believes would increase the load factor to 4# percent. 6nly the additional seats would be sold at the discounted fare. Additional !onthly advertising cost would be ( 14#,###. 7ow !uch pre/tax inco!e would the discounted fare provide Springfield Express if the co!pany has ,# passenger train cars per day, +# days per !onth0 g. Springfield Express has an opportunity to obtain a new route that would be traveled 3# ti!es per !onth. The co!pany believes it can sell seats at ( 1&, on the route, but the load factor would be only )# percent. *ixed cost would increase by ( 3,#,### per !onth for additional personnel, additional passenger train cars, !aintenance, and so on. 8ariable cost per passenger would re!ain at ( &#. 1. Should the co!pany obtain the route0 3. 7ow !any passenger train cars !ust Springfield Express operate to earn pre/tax inco!e of ( 13#,### per !onth on this route0 +. 1f the load factor could be increased to &, percent, how !any passenger train cars !ust be operated to earn pre/tax inco!e of ( 13#,### per !onth on this route0 9. -hat :ualitative factors should be considered by Springfield Express in !a.ing its decision about ac:uiring this route0