132,000 Q.4 Answer the following: I. Nelson River Tours, a division of Old-World Travel, offers two types of guided fishing tours, Beginner and Advanced Operating income for each tour type in 2021 is as follows: Beginner Advanced Revenues (1,000 $900; 800 $1,650 5900,000 $1,320,000 Operating costs Administrative salaries 240,000 200,000 Guide wages 260,000 760,000 Supplies 100,000 200,000 Depreciation of equipment 50,000 120,000 Vehicle fuel 60,000 48,000 Allocated corporate overhead 90,000 Total operating costs 800,000 1,460,000 Operating income (loss $100,000 $ (140,000 The equipment has a zero-disposal value. Guide wages, supplies, and vehicle fuel are variable costs with respect to the number of tours. Administrative salaries are fixed costs with respect to the number of tours. Dennis Baldwin, Nelson River Tours' president, is concemed about the losses incurred on the Advanced tours. He is considering dropping the Advanced tour and offering only the Beginner tour. Required: A. If the Advanced tours are discontinued, one administrative position could be eliminated, saving the company $100.000. Assuming no change in the sales of Beginner tours, what effect would dropping the Advanced tour have on the company's operating income? B. Refer back to the original data. If Nelson River Tours drops the Advanced tours, Baldwin estimates that sales of Beginner tours would increase by 50%. He believes that he could still eliminate the $100.000 administrative position. Equipment currently used for the Advanced tours would be used by the additional Beginner tours. Should Baldwin drop the Advanced tour? Explain. Page - 4 of 5 C. What additional factors should Baldwin consider before dropping the Advanced tours