Decision Making:

Decision Making #1 Great Escapes offers guided hiking trips in Alaska. Great excapes provides a guide and all necessary food and equipment. Currently the company provides an average of 600 number of hikers per month Maximum capacity is 800 number of hikers per month Daily fee charger per hiker for this service: $50 Variable costs per hiker: Fixed costs per Month: Food 5 Equipment rental 5000 Guide cost 20 Administration 3000 Supplies 2 Advertising 1000 Insurance 5 Total 32 9000 Required: Determine the effect of each of the following situations on monthly profits. You must use cell referencing to determine the effect of each situation. #1 What is current monthly profit? Each what-if situation is to be evaluated independently of all others. #2 What if there is a $12 increase in the daily fee charged per hiker, which would result in a 150 decrease in the number of hikers per month What would be the new monthly profit? #3 What-if there is a $7 decrease in the daily fee charged per hiker, which would result in a 300 increase in the number of hikers per month The last 100 hikers would be provided services by subcontractor at a cost of $46 What would be the new monthly profit? #4 What-if a tour agency proposes a special one-time order of 75 number of hikers at a reduced daily fee for these hikers of $45 The insurance cost will not be incurred on these hikers, since the tour agency covers this cost. There would be an additional fixed administration fee of $200 What would be the income from only the special order? Should the company accept this one-time special order? Explain the costs that were relevant to the decision and also explain the costs that were irrelevant to the decision. Be specific on why certain costs were relevant and others were not relevant