Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 18

On January 1, 2009, a news report on msn.com included the following sentence: “A report put out by brokerage house CLSA about Jet Airways said that the fall in ATF [fuel] prices has brought down the load factors (flight occupancy) required for the airline to break even from 78 percent to 63 percent.” What important assumptions and limitations should be considered when using this piece of information? (The load factor is the percentage of available seats on a flight that are occupied.)

Step 1 of 2

Break-Even point:

Breakeven point is the point at which a company's sales revenues are exactly equal to the total cost of sales. Therefore, at breakeven point the company neither earns any profit nor incurs any loss.