Question

Quiz: Chapter 3 Assignment 4 This Question: 5 pls 1 of 1 Lifetime Escapes generates average revenue of $7.500 per person on its 5-day package tours to wildite parts in Kenya. The variable costs per person are as folows: Click on the icon to view the variable costs per person) Annual fed costs total $570,000 Read the testirements Requirement 1. Calculate the number of package tours that must be sold to break even Determine the formula used to calculate the breakeven number of the calculate the number of package tours that must be sold to break even Breakeven number of units Requirement 2. Calolate the reven needed to com a target operating income of 5102.000 Determine the formula used to calculate the revenue to achieve the target income, then enter the amounts to calculate the revenue needed to com the target income amount given. (Enter to any, to be done Xxx Revenue to em target income Requirement. fed costs increase by 519,000, what decrease in variable colper person must be achieved to maintain the breakeven pointed in garment Determine the formato alte the reduction in variable costs to break even then enter the amount to calculate the answer Reduction in variable por un Choose from any list or enter any number in the input fields and then continue to the next question Save for La Type here to search lipo

Answer 1

Question 1

Annual fixed cost	÷	Contribution margin per unit	=	Break even number of units
$570000	÷	$1200	=	475 Package Tours

Contribution margin per unit = Unit sales - Unit variable cost

= $7500 - $6300

= $ 1200

Question 2

Total Variable Cost	+	Annual Fixed Cost	+	Target Operating Income	=	Revenue to earn target income
$3528000	+	$570000	+	$102000	=	$4200000

Operating income = Contribution - Fixed cost

Contribution = 102000+570000

= 672000

Contribution margin per unit = 1200

Number of unit sold = 672000 ÷ 1200

= 560 units

Sales = 7500 × 560 = $4200000

Variable cost = 6300 × 560 = $3528000

Question 3

Old variable cost	-	New variable cost	=	Reduction in variable cost per unit
$6300	-	$6260	=	$40

Annual fixed cost = 570000

Increase in fixed cost = 19000

Revised fixed cost = 589000

Unit contribution margin = Fixed cost÷Breakeven units

= 589000 ÷ 475

= 1240

Old contribution margin = 1200

Decrease in Variable cost = 1240-1200

= $40

New variable cost = $6300 - $40

= $6260

Question 4

Revised price = $8200

Variable cost = $6300

Contribution = $1900

Breakeven units = Fixed cost÷contribution per unit

=570000 ÷ 1900

= 300 tour packages

key question : can lifetime escapes sell enough packages at $8200 per package to earn the same total operating income than when selling packages at $7500. Loweing the breakeven point in units is the objective.

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