Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Cost Accounting Expert

problem: Lakeshore Tours Company operates a large number of tours throughout the U.S. A study has indicated that some of the tours are not beneficial, & consideration is being given to dropping these tours in order to improve the firm's overall operating performance. One such tour is a two (2) day Battlefield of the French & Indian Wars bus tour. An income statement from one of these tours is given below:

Ticket revenue

(100 seats x 45% occupancy x $80 ticket price)

$3,600

100%

Less variable expenses ($24 per person)

1,080

30%

Contribution margin

2,520

70%

Less fixed tour expenses:

 

 

 Tour promotion

$620

 

 Salary of bus driver

400

 

 Fee, tour guide

825

 

 Fuel for bus

100

 

 Depreciation of bus

400

 

 Liability insurance, bus

250

 

 Overnight parking fee, bus

50

 

 Room and meals, bus driver and tour guide

75

 

 Bus maintenance and preparation

325

 

Total fixed tour expenses

3,045

 

Net operating loss

($525)

 

 

 

 

 

 

Dropping this tour would not affect the number of buses in the firm's fleet or the number of bus drivers on the firm's payroll. Buses do not wear out through use; rather, they eventually become obsolete. Bus drivers are paid fixed annual salaries; tour guides are paid for each tour conducted. The "Bus maintenance and preparation" cost above is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the firm's fleet of buses in good operating condition. There would be no change in the number of mechanics and other service personnel as a result of dropping this tour. The liability insurance depends upon the number of buses in the firm's fleet and not upon how much they are used.

Required:

[A] Make an analysis showing what the impact will be on firm profits if this tour is discontinued.

[B] The firm's tour director has been criticized because only about 50% of the seats on the firm's tours are being filled as compared to an average of 60% for the industry. The tour director has describeed that the firm's average seat occupancy could be improved considerably by eliminating about 10% of the tours, but that doing so would reduce profits. Do you agree with the tour director's conclusion? describe your answer.

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M922184

Have any Question? 


Related Questions in Cost Accounting

The cost of capitalassume that you are a member of an

The Cost of Capital Assume that you are a member of an aerospace company's newly formed executive committee that has been given the role of reviewing requests for major capital expenditures. The committee chairman has la ...

Nbspquestions1 can marginal product be zero or negative2

Questions: 1. Can Marginal Product be Zero or negative? 2. What would be Marginal Cost if cost of producing 4 units is '50 and that of 5 units is '68? 3. Is the difference between ATC and AVC is constant? Give reason whe ...

Problem 1triglassplc has three types of capital the market

Problem 1 TriglassPlc has three types of capital. The market capitalization of its equity is $20 million. These ordinary shares have a beta of 0.9, as measure over the past five years of monthly returns which may be take ...

Cool ride skis ltd case studyit is the end of 2015 and

COOL RIDE SKIS LTD CASE STUDY It is the end of 2015 and Grace Miller, senior management accountant for Cool Ride Skis Ltd has been analysing the Victorian division's 2015 results. Both she and the company's Managing Dire ...

Cost of capitalthe intent of this assignment is to

Cost of Capital The intent of this assignment is to demonstrate proficiency in determining the costs of capital for the firm. It is a comprehensive problem in that you first need to determine the cost of each source of c ...

Part 1maintaining and controlling projectshow does evm

Part 1 Maintaining and Controlling Projects How does EVM operationalize or put into practice the management of trade-offs implied by the triple constraint discussed since the beginning of the course? Does it allow a bala ...

Assessment requirementsthis assessment has four primary

ASSESSMENT REQUIREMENTS This assessment has four primary aims: 1. To provide you with an opportunity to develop your understanding of standard costing and variance analysis; 2. To provide you with the means to further re ...

Cool ride skis ltd case studyit is the end of 2015 and

COOL RIDE SKIS LTD CASE STUDY It is the end of 2015 and Grace Miller, senior management accountant for Cool Ride Skis Ltd has been analysing the Victorian division's 2015 results. Both she and the company's Managing Dire ...

This consists of a series of short answers to given

This consists of a series of short answers to given questions or statements. In a single Word document, provide 1-2 paragraphs about each of the following: 1. Explain and provide an example of each step of the five-step ...

Abc costing1 assume you own a business that makes two

ABC COSTING 1. Assume you own a business that makes two complementary products for which you allocated manufacturing overhead proportionally. A competitor is trying to undercut your price for one of the products. How mig ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate