Question

Cranmore Carriage Company offers guided​ horse-drawn carriage rides through historic

Anderson, South Carolina.

The carriage business is highly regulated by the city.

Cranmore

Carriage Company has the following operating costs during​ April:

​During April​ (a month during peak​ season),

Cranmore

Carriage Company had

13,300

passengers.

Seventy

percent of passengers were adults

​($24

​fare) while

30​%

were children

​($16

​fare)

Monthly depreciation expense on carriages and stable. . . . . . . . . . . . . . . . . . . . . . . . .	$2,600
Fee paid to the City of Anderson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10% of ticket revenue
Cost of souvenir set of postcards given to each passenger. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$0.50/set of postcards
Brokerage fee paid to independent ticket brokers (60% of tickets are issued through these brokers; 40% are sold directly by the Cranmore Carriage Company)	$1.80/ticket sold by broker
Monthly cost of leasing and boarding the horses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$53,000
Carriage drivers (tour guides) are paid on a per passenger basis. . . . . . . . . . . . . . . . . .	$3.10 per passenger
Monthly payroll costs of non-tour guide employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$7,700
Marketing, website, telephone, and other monthly fixed costs. . . . . . . . . . . . . . . . . . . . . . . . . . .	$7,050

Requirement 1. Prepare the​ company's contribution margin income statement for the month of April. Round all figures to the nearest dollar. ​(Do not round interim calculations or amounts. Round all amounts input in the table to the nearest​ dollar.)

Cranmore Carriage Company
Contribution Margin Income Statement
For the Month Ended April 30
Sales revenue
Less:	Variable expenses
	Fee paid to city
	Complimentary postcards
	Brokerage fee
	Carriage driver wages
Contribution margin
Less:	Fixed expenses
	Leasing and boarding horses
	Non-carriage driver payroll expense
	Depreciation expense
	Other fixed operating expenses
Operating income

Requirement 2:

Assume that passenger volume increases by 14​% 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.

Note-1

Note-2

2.

Passenger Volume In April=13300

Passenger Volume In May=Increase at 14% Over April

=13300*114/100

=15162

Note-1

Note-2

The variable expenses are subjected to change as they are directly related to the sales revenue.

Fidex costs remain constant irrespective of the volume of services.