Bus Lines is a passenger coach line that contracts with larger, well-known lines to provide transportation across the United States. Bus Lines owns 65 buses, and currently has contracts for 55 of those buses. The other lines pay Bus Lines $750,000 per year to provide carrier services for their passengers.
Bus Lines is considering a new contract where they would provide 15 buses to a new company for $300,000 per year. Each Bus Lines bus incurs yearly costs of $90,000 for labor, $50,000 for fuel, $80,000 in fixed overhead, and $150,000 in variable overhead. Contracts are for 5 years, which will not allow Bus Lines to use buses currently in use for new contracts. The cost of acquiring a new bus is $90,000, which is depreciated over the 5-year contract.
What would be the differential gain or loss on this contract?

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The Answer of Bus Lines is a passenger coach line that contracts with larger, well-known lines to provide transportation across the United States. Bus Lines owns 65 buses, and currently has contracts for 55 of those buses. The other lines pay Bus Lines $750,000 per year to provide carrier services for their passengers.
Bus Lines is considering a new contract where they would provide 15 buses to a new company for $300,000 per year. Each Bus Lines bus incurs yearly costs of $90,000 for labor, $50,000 for fuel, $80,000 in fixed overhead, and $150,000 in variable overhead. Contracts are for 5 years, which will not allow Bus Lines to use buses currently in use for new contracts. The cost of acquiring a new bus is $90,000, which is depreciated over the 5-year contract.
What would be the differential gain or loss on this contract?

Bus Lines Is a Passenger Coach Line That Contracts with Larger