Discount Airlines is preparing a contribution margin report segmented by route. The following information is available: Atlanta / New York Miami/LA New York / Chicago Average ticket price per passenger $900 $1,250 $750 Total passengers served 8,800 7,100 10,200 Total miles flown 121,000 190,000 95,000 The variable costs per unit are as follows: Food/beverage service $7 per passenger Selling $90 per passenger Fuel $15 per mile Wages $20 per mile What is the contribution margin ratio for the Miami/LA route (rounded to one decimal place) ?

Question

Business

Brennen Grimes

29 August, 11:57

Discount Airlines is preparing a contribution margin report segmented by route. The following information is available: Atlanta / New York Miami/LA New York / Chicago Average ticket price per passenger $900 $1,250 $750 Total passengers served 8,800 7,100 10,200 Total miles flown 121,000 190,000 95,000 The variable costs per unit are as follows: Food/beverage service $7 per passenger Selling $90 per passenger Fuel $15 per mile Wages $20 per mile What is the contribution margin ratio for the Miami/LA route (rounded to one decimal place) ?

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Barbara Molina · Answer 1

17.3%

Explanation:

The contribution margin ratio is shown below:

Contribution margin ratio = Contribution margin : Sales * 100

where,

Contribution margin is

= Sales - variable cost

Sales arise from passengers ($1,250 * 7,100) $8,875,000

Less:

Food ($7 * 7,100) $497,00

Selling ($90 * 7,100) $639,000

Fuel ($15 * 190,000) $2,850,000

Wages ($20 * 190,000) $3,800,000

Total variable cost ($7,338,700)

Contribution margin $1,536,300

So, the contribution margin ratio is

= $1,536,300 : $8,875,000

= 17.3%