ExpertMedium2 marksShort Answer
ACCA · Question 7 · Decision-making techniques
Section A
EcoTransit operates a fleet of electric buses. The company has fixed costs of $240,000 per month. The average ticket price is $4.00, and the variable cost per passenger (electricity, ticketing fees) is $1.60.
Calculate the breakeven revenue per month for EcoTransit. (Enter your answer as a whole number, without the $ sign)
Section A
EcoTransit operates a fleet of electric buses. The company has fixed costs of $240,000 per month. The average ticket price is $4.00, and the variable cost per passenger (electricity, ticketing fees) is $1.60.
Calculate the breakeven revenue per month for EcoTransit. (Enter your answer as a whole number, without the $ sign)
How to approach this question
1. Calculate the Contribution to Sales (C/S) ratio: (Selling Price - Variable Cost) / Selling Price.
2. Calculate Breakeven Revenue: Fixed Costs / (C/S ratio).
Full Answer
1. Contribution per passenger = $4.00 - $1.60 = $2.40.
2. C/S Ratio = $2.40 / $4.00 = 0.60 (or 60%).
3. Breakeven Revenue = Fixed Costs / C/S Ratio = $240,000 / 0.60 = $400,000.
Common mistakes
Calculating the breakeven point in units (100,000 passengers) and forgetting to multiply by the selling price to get revenue.
Practice the full ACCA PM — Performance Management Practice Exam 6
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