Question

Carter Carriage Company offers guided​ horse-drawn carriage rides through historic Sumter comma South Carolina. The carriage business is highly regulated by the city. Carter Carriage Company has the following operating costs during​ April: LOADING...​(Click the icon to view the​ information.) During April​ (a month during peak​ season), Carter Carriage Company had 13 comma 400 passengers. Eighty percent of passengers were adults ​($20 ​fare) while 20​% were children ​($12 ​fare). Requirements 1. Prepare the​ company's contribution margin income statement for the month of April. Round all figures to the nearest dollar. 2. Assume that passenger volume increases by 20​% in May. Which figures on the income statement would you expect to​ change, and by what percentage would they​ change? Which figures would remain the same as in​ April?

Answer 1

1) Carter Carriage Company

Income Statement

For the month ended April 202x

Revenues:

• Adults passengers $214,400
• Children $32,160
• Total revenues $246,560

Variable costs:

• City fees $24,656
• Souvenirs $7,370
• Brokerage fees $11,256
• Carriage drivers $52,260
• Total variable costs $95,542

Contribution margin $151,018

Period costs:

• Depreciation $2,900
• Horse leases $48,000
• Marketing expenses $7,350
• Payroll expenses $7,600
• Total period costs $65,850

Operating profit $85,168

2) If the total amount of passengers increase by 20%, then all variable costs will increase by 20% except brokerage fees which would increase only by 12%. Revenues should also increase by 20%. Period costs should not change.

Contribution margin should increase by 20.6% and operating profit would increase by 36.5%.