Question 1 : Case Study: The Spean Bridge Bus Company
The Spean Bridge Bus Company operates a fleet of six buses on three
different routes in and around Fort William, Scotland. There are two
buses assigned to each route and each bus completes five return journeys
per day 52 weeks a year. There is no service on a Sunday. The rural bus
service is essential to many of the small communities in and around the
The company is in the process of planning its routes, prices and
schedules for the coming year. The traffic office has provided the
Route A B C
Return journey distance (km) 42 36 44
Passenger numbers per return journey
Adults 13 9 15
Children 5 8 5
Return journey fares
Adult ?3.10 ?6.00 ?4.50
Children ?1.40 ?3.00 ?2.25
The following data has been provided by finance;
Fuel ?0.82 per km
Wages ?360 per week
Bus fixed operating costs ?2000 per year
General overheads ?180,000 per year
a) Prepare a statement for management showing;
– the planned contribution for each route per day
– the planned contribution for each route per year
– the planned total contribution for the company
– the planned profit for the company
b) Based on your results discuss the appropriate action the company
c) The company is considering introducing a new pricing policy, a day
rider ticket which will allow unlimited travel for a day on any of its
routes. The suggested price is ?5 for adults and ?2.25 for children. It
is hoped that this new ticket will increase demand for the service.
Critically evaluate this new pricing policy from both a financial and a
Total 45 marks
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