Far East Adventure Holidays offers a variety of holiday packages aimed at families, seniors and corporate groups. The Financial Controller Amy Wu is preparing for the annual Board meeting, and is concerned about the loss the business has made in the last year. She has examined the profits for each of the three departments of the business - family, seniors and corporate - and it seems that corporate is the source of the problem.

Amy has asked for your assistance to look more closely at the three packages offered by the corporate department, to see which packages are making profits and which are not. The three packages are to Sri Lanka, Singapore and Cambodia. The sales and direct costs for each corporate package over the last year was as follows:-

The profit of each package is calculated by allocating a proportion of the overhead costs of running the corporate department, based on the proportion of actual sales revenue. For last year these overhead costs were as follows:-

Salaries 200,000 
Phone 2,000 
Depreciation on Equipment 5,000 
Utilities 2,000 
Rent and Taxes 9,000 
Other department costs 12,000 
Total Corporate Dept 230,000

Required:

1. Calculate the profit per package and the total profitability of each of the three corporate packages

2. Compare the profitability of the three corporate packages

3. Do you believe that the allocation of department overhead to packages based on actual sales revenue is appropriate? Can you suggest a better method?

4. Use your method in part 3 to develop an alternative report on the profitability of each package for the year.

5. Based on your answer to 4, identify the actions Fast East Adventure Holidays should take to improve profitability