ezto.mheducation.com chapter 10 homework g question | Chegg.com Golden Tours, In
ID: 2530327 • Letter: E
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ezto.mheducation.com chapter 10 homework g question | Chegg.com Golden Tours, Inc, operates tours throughout the United States. A study has indicated that some of the tours are not profitabl overall operating performance. e, and consideration is being given to dropping these tours to mprove the company's One such tour is a two-day Historic Mansions bus tour conducted in the southem states. An income statement from a typical Historic Mansions tour is given below Ticket revenue (110 seat capacity 40% occupancy x $85 ticket price per person) Variable expenses ($17 per person) $3,740 748 100% 20% Contrbution margin $2,992 80% Tour expenses: Tour promotion Salary of bus driver Fee, tour guide Fuel for bus Depreciation of bus Liability insurance, bus Overnight parking fee, bus Rcom and meals, bus driver and tour guide Bus maintenance and preparation S 750 430 790 150 430 280 80 260 300 Total tour expenses 3,470 Net operating loss $ (478) The following additional information is available about the tour a. Bus drivers are paid fixed annual salaries; tour guides are paid for each lour conducted. b. The "Bus maintenance and preparation" cost is an allocatlon of the salaries of mechanics and other service personnel who are responsible for keeping the company's fleet of buses in good operating condiion. c. Depreclation of buses is due to obsolescence. Depreciation due to wear and tear is neg gible. d. Liability insurance premiums are based on the number of buses in the company's fleet. e. Dropping the Historic Mansions bus tour would not allow Golden Tours to reduce the number of buses in its fleet, the number of bus drivers on the payroll, or the size of the maintenance and preparation staff Required: By how much will the profits increase or decrease if this tour is discontinued? wouldExplanation / Answer
Note :
Answer
Computation of increase or (decrease) in profit if the tour is discontinued.
Profits would decrease by $962
Particulars Amount ($) Contribution Lost (2,992) Less : Saving in avoidable costs Tour promotion 750 Fee for tour gide 790 Fuel for bus 150 Overnight parking fee 80 Rooms & meals for driver & guide 260 Increase or (decrease) in profit ($962)Related Questions
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