LifetimeLifetime

Escapes generates average revenue of

$ 6 comma 250$6,250

per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows:

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(Click on the icon to view the variable costs per person.)Annual fixed costs total

$ 500 comma 000$500,000.

Read the requirements

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.

Requirement 1. Calculate the number of package tours that must be sold to break even.

Determine the formula used to calculate the breakeven number of units, then calculate the number of package tours that must be sold to break even.

	/		=	Breakeven number of units
	/		=

Requirement 2. Calculate the revenue needed to earn a target operating income of

$ 96 comma 000$96,000.

Determine the formula used to calculate the revenue to achieve the target income, then enter the amounts to calculate the revenue needed to earn the target income amount given. (Enter ratios, if any, to two decimalplaces, X.XX.)

							Revenue to earn
(		+		) /		=	target income
(		+		) /		=

Requirement 3. If fixed costs increase by

$ 31 comma 000$31,000,

what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in requirement 1?

Determine the formula to calculate the reduction in variable costs to still break even, then enter the amount to calculate the answer.

				Reduction in variable
	-		=	cost per unit
	-		=

Requirement 4. The general manager at

LifetimeLifetime

Escapes proposes to increase the price of the package tour to

$ 7 comma 250$7,250

to decrease the breakeven point in units. Using information in the original problem, calculate the new breakeven point in units. What factors should the general manager consider before deciding to increase the price of the package tour?

The number of tour packages that must be sold to break even is

tour packages.

What factors should the general manager consider before deciding to increase the price of the package tour?

The key question for the general manager is:

A.Can

LifetimeLifetime

Escapes sell enough packages at

$ 7 comma 250$7,250

per package to earn the same total operating income than when selling packages at

$ 6 comma 250$6,250.

Lowering the breakeven point in units is the objective.

B.Can

LifetimeLifetime

Escapes sell

250250

tour packages at

$ 7 comma 250$7,250

per package.

C.Can

LifetimeLifetime

Escapes increase the price of the package tour further to decrease the breakeven points to less than

250250

tour packages.

D.Can

LifetimeLifetime

Escapes sell enough packages at

$ 7 comma 250$7,250

per package to earn more total operating income than when selling packages at

$ 6 comma 250$6,250.

Lowering the breakeven point in units is not the objective.

Airfare

$1,500

Hotel accommodations

2,650

Meals

800

Ground transportation

200

Park tickets and other costs

100

Total

$5,250

1.	Calculate the number of package tours that must be sold to break even.
2.	Calculate the revenue needed to earn a target operating income of $ 96 comma 000$96,000.
3.	If fixed costs increase by $ 31 comma 000$31,000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in requirement 1?
4.	The general manager at LifetimeLifetime Escapes proposes to increase the price of the package tour to $ 7 comma 250$7,250 to decrease the breakeven point in units. Using information in the originalproblem, calculate the new breakeven point in units. What factors should the general manager consider before deciding to increase the price of the package tour?