Business Studies · May / June 2019 · Paper 11 · Question 1

Y2M is a bus operating company in the public sector. One of its objectives is to break even on every bus route. Most of its competitors are in the private sector. Y2M wants to increase the number of customers using its buses. The Finance Director has been looking at some cost data shown in Table1. This is because Y2M plans to review its pricing methods. She is worried other businesses pay workers a higher wage rate and some of its drivers may leave. She said: ‘To pay the same wage rate would increase variable cost to $2.20 per passenger per journey.’ Table 1: Cost and price data for one Y2M route Number of passengers per day 90 Price per passenger per journey $2.50 Fixed costs per week $300 Variable cost per passenger per journey $2

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