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Night Flights is preparing a contribution margin report segmented by route. The following information is available: Miami/LA Atlanta/ New York New York/ Chicago Average ticket price per passenger $1,250 $900 $750 Total passengers served 5,400 8,800 12,200 Total miles flown 190,000 176,000 97,600 The variable costs per unit are as follows: Fuel $25 per mile Wages $45 per mile Food/beverage service $7 per passenger Selling $70 per passenger What is the contribution margin ratio for the New York/Chicago route (to the closest tenth of a percent)?

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Answer:

The contribution margin is $1.244.000

Explanation:

The contribution margin  is the difference between the incomes and the variable cost

CM=Sales (incomes)- variable cost

In the case New York/ Chicago

Ticket price        $750        

Passengers        12000        

Miles flown        97600        

Incomes= Ticket price*Passengers=$750*12000=$9.000.000

To get the Variable cost                

Fuel ($25 per mile)= cost * miles=25*97600=2440000

Wages ($45 per mile) = $45*97600=4392000

Food/beverage service ($7 per passenger)=7*12000=84000

Selling ($70 per passenger)=70*12000=840000

      TOTAL:         7756000

CM=Sales (incomes)- variable cost =$9.000.000

-7756000=$1.244.000

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