Target Costing in a Service Firm Take-a-Break Travel Company offers spring break travel pa...

Target Costing in a Service Firm Take-a-Break Travel Company offers spring break travel packages to college students. Two of its packages, a seven-day, six-night trip to Cancun and a five-day, four-night trip to Jamaica, have the following characteristics:

The Cancun trip sells for $750, and the Jamaica trip sells for $690.

Required

1. What are the current profit margins on both trips?

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2. Take-a-Break’s management believes that it must drop the price on the Cancun and Jamaica trips to $710 and $650, respectively, in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.

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3. Describe two ways that Take-a-Break Travel could cut its costs to get the profit margins back to their original levels.