Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being

Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve the companys overall operating performance.

One such tour is a two-day Historic Mansions bus tour conducted in the southern states. An income statement from a typical Historic Mansions tour is given below:

Ticket revenue (110 seat capacity 40% occupancy $65 ticket price per person) $ 2,860 100 %
Variable expenses ($11.00 per person) 484 16.9




Contribution margin 2,376 83.1 %








Tour expenses:
Tour promotion $ 710
Salary of bus driver 330
Fee, tour guide 710
Fuel for bus 165
Depreciation of bus 400
Liability insurance, bus 150
Overnight parking fee, bus 80
Room and meals, bus driver and tour guide 185
Bus maintenance and preparation 240


Total tour expenses 2,970


Net operating loss $ (594)





The following additional information is available about the tour:
a. Bus drivers are paid fixed annual salaries; tour guides are paid for each tour conducted.
b.

The Bus maintenance and preparation cost on the previous page is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the companys fleet of buses in good operating condition.

c.

Depreciation of buses is due to obsolescence. Depreciation due to wear and tear is negligible.

d. Liability insurance premiums are based on the number of buses in the companys fleet.
e.

Dropping the Historic Mansions bus tour would not allow Blueline Tours to reduce the number of buses in its fleet, the number of bus drivers on the payroll, or the size of the maintenance and preparation staff.

Required:
By how much will the profits increase or decrease if this tour is discontinued? (Input the amount as a positive value. Omit the "$" sign in your response.)

Profits would decrease by????? $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Portfolio Of Marketing Audits Company Self Assessment Audits

Authors: David Crosby

1st Edition

1902433157, 978-1902433158

More Books

Students also viewed these Accounting questions