Goldner 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 2017 is as follows: (Click to view the operating income for each tour type.) 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. Alex Smith, Goldner River Tours' president, is concerned about the losses incurred on the Advanced tours. He is considering dropping the Advanced tour and offering only the Beginner tour. Required Requirement 1. If the Advanced tours are discontinued, one administrative position could be eliminated, saving the company $108,000. Assuming no change in the sales of Beginner tours, what effect would dropping the Advanced tour have on the company's operating income? (Enter losses in revenues as a negative amount. Enter a zero if the cost is not relevant. If the net effect is an operating loss, enter the amount with parentheses.) Difference: Incremental (loss in revenues) and savings in costs from Required dropping Advanced tours Lost revenues from Advanced tours Avoidable operating costs from dropping Advanced tours: 1. If the Advanced lours are discontinued, one administrative position could be eliminated, saving the company $108.000. Assuming no change in the sales of Administrative salaries Beginner tours, what effect would dropping the Advanced tour have on the Guide wages company's operating income? Supplies 2. Refer back to the original data. If Goldner River Tours drops the Advanced tours, Smith estimates that sales of Beginner tours would increase by 50%. He believes Vehicle fuel that he could still eliminate the $108.000 administrative position. Equipment currently used for the Advanced tours would be used by the additional Beginner Total avoidable costs tours. Should Smith drop the Advanced tour? Gain/(loss) in operating income from dropping Advanced tours 3. What additional factors should Smith consider before dropping the Advanced tours? Print Done i Required X 1. If the Advanced tours are discontinued, one administrative position could be eliminated, saving the company $108,000. Assuming no change in the sales of Beginner tours, what effect would dropping the Advanced tour have on the company's operating income? 2. Refer back to the original data. If Goldner River Tours drops the Advanced tours, Smith estimates that sales of Beginner tours would increase by 50%. He believes that he could still eliminate the $108,000 administrative position. Equipment currently used for the Advanced tours would be used by the additional Beginner tours. Should Smith drop the Advanced tour? 3. What additional factors should Smith consider before dropping the Advanced tours? Print Done i Operating income for each tour Beginner Advanced $ 924,150 $ 1,348,650 Revenues (1,010 x $915; 810 x $1,665) Operating costs Administrative salaries 238,000 Guide wages 264,000 203,000 761,000 205,000 131,000 102,500 Supplies Depreciation of equipment 57,000 Vehicle fuel 66,000 88,000 54,000 137,000 Allocated corporate overhead Total operating costs 815,500 1,491,000 $ 108,650 $ (142,350) Operating income (loss) Print Done