Read http://www.zacks.com/stock/news/81160/airline-industry-stock-outlook-august

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Business Finance

Description

Identify 3 factors and their impacts that affects the airline ability to break even (contribution margin, fixed costs, variable costs, a combination) and what happens if these factors increase or decrease.

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Explanation & Answer

Contribution margin

If this increases, then the ability to break even will be more. Even at a lower volume it can sustain the operation.

If this decreases, then the ability to break even decreases.

Variable Costs

If this increases, then the ability to break even will be less. At a higher volume it can sustain the operation.

If this decreases, then the ability to break even increases.

Fixed Costs

If this increases, then the ability to break even will be less. It has to have a higher volume to sustain the operation

If this decreases, then the ability to break even increases.


 


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