Question
LearningExchange Ltd offers specialised exchange programs for Australian students to live overseas and study in a local school from two to twelve months. The companys
LearningExchange Ltd offers specialised exchange programs for Australian students to live overseas and study in a local school from two to twelve months. The companys exchange programs also include local tours. The sales and direct cost data on the two popular programs for last year are as follows: Thailand New Zealand Number of exchange programs sold 10 15 Number of students per program 6 6 Revenue per student $14,000 $17,000 Direct cost per program: Program leaders' salary (percentage of revenue per program) 5% 7% Program assistant salary $5,000 $6,000 Local school fees (percentage of revenue per program) 25% 30% Local tour guides $2,000 $4,200 Air travel cost $4,500 $1,900 Accommodation and meals $20,000 $38,000 Insurance $2,100 $2,200 The overhead costs for the last year as follows: Managers' salaries $100,000 Sales personnel salaries $120,000 Rent and property taxes $22,000 Utilities $8,000 Depreciation on equipment $6,000 Other operating costs $9,000 To calculate the profitability of each exchange program, overheads are allocated to each program in proportion to the actual sales revenue. Required: 1. Calculate the contribution of each tour package towards the overall profit of the company. [10 marks] Click or tap here to enter text. 2. Should the company keep on offering both tour packages? Explain and support your answer with necessary calculations. [1 mark] Click or tap here to enter text. 3. Do you consider the companys overhead allocation method to be appropriate or would you suggest an alternative? Explain. [1 mark] Click or tap here to enter text. 4. What should the company do to improve the profitability of each exchange program? Provide some suitable examples
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started