CUSTOM COST ACCOUNTING 15E
15th Edition
ISBN: 9781269831338
Author: Horngren
Publisher: PEARSON C
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Chapter 3, Problem 3.38P
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:
| 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.
- 1. Calculate the number of package tours that must be sold to break even.
Required
- 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 maintain the breakeven point calculated in requirement 1?
- 4. The general manager at Lifetime Escapes proposes to increase the price of the package tour to $8,200 to decrease the breakeven point in units. Using information in the original problem, calculate the new breakeven point in units. What factors should the general manager consider before deciding to increase the price of the package tour?
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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.
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 revenue needed to earn a target operating income of $102,000.
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?
Chapter 3 Solutions
CUSTOM COST ACCOUNTING 15E
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
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