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# 1 Single Product CVP Grand Canyon Adventures sells individual tickets for $ 7 5 for walking tours of the Grand Canyon. Each ticket has

#1 Single Product CVP
Grand Canyon Adventures sells individual tickets for $75 for walking tours of the Grand Canyon. Each ticket has variable costs (including lunch) of $15 per ticket. The company has total fixed costs of $200,000.
Required:
a. What is the CM per unit?
75-15=60
b. How many tickets must be sold to breakeven?
60.x =200,000
=> x =3,334
c. How many units of tickets must be sold to earn a target income of $60,000?
1000+3,334=4,334
d. If unit-level costs increase to $20 per ticket, what decrease in annual fixed costs must be achieved to keep the same breakeven point as calculated in part b?
3,334(75-20)
e. Back to original assumptions: What is the CM ratio?
60/75=0.8
f. Using the CM ratio, what level of revenue is needed to breakeven?
200,000.80=250,000
g. What level of revenue is needed to earn a target income of $42,000?
200,000+42,000=242,000/.8=302,000
h. How many tickets must be sold to earn after-tax income of $120,000(with a tax rate of 40%)
666.7
i. If 4,000 tickets are sold (what is equivalent to $300,000 of sales) what is the margin of safety in units? In dollars?
4000-3,334=666
j. If 4,000 tickets are sold, what is the DOL? If 5,000 units are sold? If 10,000 units are sold?
k. Assume that 4,000 tickets are sold, if sales increase by 5% what will happen to profit? Assume that 10,000 tickets are sold, if sales increase by 5% what will happen to profit?

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