The Luxury Passenger Carrier - Case Study Example

The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000? f. (Use original data). Springfield Express is considering offering a discounted fare of $ 120, which the company believes would increase the load factor to 80 percent. Only the additional seats would be sold at the discounted fare. Additional monthly advertising cost would be $ 180,000. How much pre-tax income would the discounted fare provide Springfield Express if the company has 50 passenger train cars per day, 30 days per month? g. Springfield Express has an opportunity to obtain a new route that would be traveled 20 times per month.

The company believes it can sell seats at $ 175 on the route, but the load factor would be only 60 percent. Fixed cost would increase by $ 250,000 per month for additional personnel, additional passenger train cars, maintenance, and so on. Variable cost per passenger would remain at $ 70. Springfield Express should be sure that its forecasts are correct.