CVP analysis, service firm. Lifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows: $1,600 3,100 600 300 Airfare Hotel accommodations Meals Ground transportation Park tickets and other costs Total $6,300 Annual fixed costs total $570,000.

CVP analysis, service firm. Lifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows: $1,600 3,100 600 300 Airfare Hotel accommodations Meals Ground transportation Park tickets and other costs Total $6,300 Annual fixed costs total $570,000.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 12EB: Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month...

See similar textbooks

Similar questions

Lifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows:Airfare $1,600 Hotel accommodations 3,100 Meals 600 Ground transportation 300 Park tickets and other costs 700 Total $6,300 Annual fixed costs total $570,000. Q. Calculate the number of package tours that must be sold to break even.
3-38 CVP analysis, service firm. Lifetime Escapes generates average revenue of $7,500 per person on its5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows:Airfare $1,600Hotel accommodations 3,100Meals 600Ground transportation 300Park tickets and other costs 700Total $6,300Annual fixed costs total $570,000.1. Calculate the number of package tours that must be sold to break even.2. Calculate the revenue needed to earn a target operating income of $102,000.3. If fixed costs increase by $19,000, what decrease in variable cost per person must be achieved to maintainthe breakeven point calculated in requirement 1?4. The general manager at Lifetime Escapes proposes to increase the price of the package tour to $8,200to decrease the breakeven point in units. Using information in the original problem, calculate thenew breakeven point in units. What factors should the general manager consider before deciding toincrease the price of the package tour?
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 3,000,000Variable expenses 1,500,000Contribution margin 1,500,000Fixed expenses 200,000Net operating income $ 1,300,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $53,000 and fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's sales to increase by 10%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a…
WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following. Activity Activity Measure (cost driver) Unit Cost(cost per unit of activity) Flying and maintaining aircraft Number of flights $ 2,000 per flight Serving passengers Number of passengers $ 5 per passenger Advertising and marketing Number of promotions $ 55,000 per promotion WSM estimates the following annual information. With 23 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $250. The lease of the 60-seat aircraft will cost $5,000,000. Other equipment costs will be $2,500,000. Administrative and other marketing costs will be $1,350,000. Required: a.…
1. University Catering sells 50 pound bags of popcorn in the university dormitories for P10 abag. Fixed cost of this operation are P80,000 while variable costs of the popcorn are P.10per pound.a. What is the BEP in bags?b. Calculate the EBIT or loss on 12,000 bags and 25,000 bags.c. Calculate the EBIT or loss on 25,000 bags.
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 160,000 Net operating income $ 920,000 Required: Answer each question independently based on the original data: 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's unit sales to increase by 14%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 11% reduction in the selling price, combined with a $72,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income…
WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following: Activity Activity Measure (cost driver) Unit Cost (cost per unit of activity) Flying and maintaining aircraft Number of flights $ 1,800 per flight Serving passengers Number of passengers $ 5 per passenger Advertising and marketing Number of promotions $ 53,000 per promotion WSM estimates the following annual information. With 16 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $235. The lease of the 60-seat aircraft will cost $4,600,000. Other equipment costs will be $2,300,000. Administrative and other marketing costs will be $1,250,000. Required: a. What…
WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following. Activity Activity Measure (cost driver) Unit Cost(cost per unit of activity) Flying and maintaining aircraft Number of flights $ 1,300 per flight Serving passengers Number of passengers $ 5 per passenger Advertising and marketing Number of promotions $ 48,000 per promotion WSM estimates the following annual information. With 13 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $190. The lease of the 60-seat aircraft will cost $3,600,000. Other equipment costs will be $1,800,000. Administrative and other marketing costs will be $1,000,000. Required: a.…
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 3,240,000 Variable expenses 1,620,000 Contribution margin 1,620,000 Fixed expenses 180,000 Net operating income $ 1,440,000 Required: Answer each question independently based on the original data: 1. The sales manager is convinced that a 12% reduction in the selling price, combined with a $71,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? 2. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.20 per unit. He…
WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following. Activity Activity Measure (cost driver) Unit Cost(cost per unit of activity) Flying and maintaining aircraft Number of flights $ 1,400 per flight Serving passengers Number of passengers $ 5 per passenger Advertising and marketing Number of promotions $ 49,000 per promotion WSM estimates the following annual information. With 14 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $195. The lease of the 60-seat aircraft will cost $3,800,000. Other equipment costs will be $1,900,000. Administrative and other marketing costs will be $1,050,000. Required: a.…
A gym fabricates a special sports tape used for rock climbing. The shop can produce each pack of tape at a labor cost of P200. The cost of materials for each pack is P350. The variable cost amounts to P65/pack, while fixed charges incurred per annum totals P6900. Given that the special sports tape are sold at P780/pack, how many units must be produced and sold per annum so no losses will be incurred and the total cost is the same as gross revenue?
Magic Realm, Inc., has developed a new fantasy board game. The company sold 15,000 games last year ata selling price of $20 per game. Fixed costs associated with the game total $182,000 per year, and variablecosts are $6 per game. Production of the game is entrusted to a printing contractor. Variable costs consistmostly of payments to this contractor.Required:1. Prepare a contribution format income statement for the game last year and compute the degree ofoperating leverage.2. Management is confident that the company can sell 18,000 games next year (an increase of 3,000games, or 20%, over last year). Compute:a. The expected percentage increase in net operating income for next year.b. The expected total dollar net operating income for next year. (Do not prepare an income statement;use the degree of operating leverage to compute your answer.)