Question

If Cape Cod ​Railway's fixed costs total $70,000 per​ month, the variable cost per passenger is $20, and tickets sell for $100​, how much revenue must the Railway generate to earn $180,000 in operating income per​ month?

Answer 1

To solve the problem, you have to solve for the total cost by getting the sum of fixed and variable costs:

$70,000 + $2,000 = $72,000 total cost

Then, use the formula of solving for the operating income (Revenue - Total Costs = Operating Income).

The problem is looking for the revenue, here’s how to solve for it:

Let x be the revenue:

X - $72,000 = $180,000

X = $180,000 + $72,000

X = $252,000