Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 37

CVP Analysis with Subsidies
Suburban Bus Lines operates as a not-for-profit organization providing local transit service. As a not-for-profit, it refers to an excess of revenues over costs as a "surplus" and an excess of costs over revenues as a "deficit." Suburban charges $1.00 per ride. The variable costs of a ride are $1.50. The fixed costs of Suburban are $200,000 annually. The county government provides Suburban with a flat subsidy of $250,000 annually.
Required
a. What is the break-even point for Suburban
b. Suburban expects 75,000 riders this year. Will it operate at a surplus or deficit