3. Bristol Car Service offers airport service in a mid-size city. Bristol charges $34 per...
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3. Bristol Car Service offers airport service in a mid-size city. Bristol charges $34 per trip to or from the airport. The variable cost for a trip totals $20, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is $3,220.
Required:
a. How many trips must Bristol sell every month to break even?
b. Bristol's owner believes that 240 trips is a reasonable forecast of the average monthly demand. What is the margin of safety in terms of the number of airport trips?
4. Hunter & Sons sells a single model of meat smoker for use in the home. The smokers have the following price and cost characteristics:
Sales price
$
75
per smoker
Variable costs
39
per smoker
Fixed costs
288,000
per month
Hunter & Sons is subject to an income tax rate of 40 percent.
Required:
a. How many smokers must Hunter & Sons sell every month to break even?
b. How many smokers must Hunter & Sons sell to earn a monthly operating profit of $45,360 after taxes?
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