2b) High Flying takes tourists on helicopter tours of Hawaii. Each tourist buys

Question

2b) High Flying takes tourists on helicopter tours of Hawaii. Each tourist buys a $150 ticket; the variable average S60 per person. High Flying has annual fixed costs of $702,000. Required A. Compute the average number of tours the company must conduct per month to brea k even. B. Compute the average sales revenue needed per month to p roduce a target average profit of $36,00 month. See below (answer to "B") C. Calculate the contribution margin ratio. D. Determine whether the actions that follow will increase, decrease, or not affect the company's brea point. 1. A decrease in tour prices. 2. The termination of a salaried clerk (no replacement is planned). 3. A decrease in the number of tours sold. 27) Trane Medical Clinic offers a number of specialized medical services. A review of data for the year j ended revealed variable costs of $32 per patient day; annual fixed costs of $480,000, which are incur throughout the year; and semivariable costs that displayed the following behavior at the "peak" and" activity: January (2,400 patient days): $258,400 August (2,900 patient days): $278,900 Required A. Calculate the total cost for an upcoming month (2,800 patient days) if current cost behavior patter continue. Trane uses the high-low method to analyze cost behavior. B. There is a high probability that Trane's volume will increase in forthcoming months as patients ta? advantage of new scientific advances. Can the data and methodology used in part (a) for predicting t 2,800 patient days be employed to estimate the costs for, say, 3,800 patient days? Why or why not?

Explanation / Answer

Q26 Req A: Revenue per ticket: 150 variable cost per ticket: 60 Contribution margin per ticket (Revenue-Variable cost) 90 Fixed Cost: $ 702000 Break even in terms of number off tours: Fixed Cost / Contribution per tour $ 702000 /90 = 7800 tours Req B: Desired profits: $ 36000 Desired Contribution: Dsired profit+ fixed cost= 36000+702000 = 738000 Cm ratio : Contribution perr ticket/Revenue per ticket *100 90/150 *100 =60% Required sales in $:   Desired contribution /CM ratio *100 738,000 /60% = $1230,000 Req c: CM ratio: Contribution per ticket/ Revenue per ticket * 100 $ 90 / 150 * 100 = 60% Req d: 1. Decrease in Tour prices: Increase in break even 2. the termination of salaried clerk: Decrease 3. A number of tour sold decrease: No effect on break even

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