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Comfi Airways

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Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance
in some basic analysis of its operations. Both planes seat 10 passengers each, and
they fl y commuters from Comfi’s base airport to the major city in the state, Metropolis.
Each month, 40 round-trip flights are made. Shown below is a recent month’s activity in
the form of a cost-volume-profit income statement.

(a) Calculate the break-even point in (1) dollars and (2) number of fares.
(b) Without calculations, determine the contribution margin at the break-even point.
(c) If fares were decreased by 10%, an additional 100 fares could be generated. However,
total variable costs would increase by 20%. Should the fare decrease be adopted?

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