Outback Escapes generates a revenue of $7,500 per person on its five-day package tours to wildlife parks in Kenya. The variable costs per person are as follows: Airfare $1,600 Hotel accommodation $3,100 Meals $600 Ground transportation $300 Park tickets and other costs $700 Total $6,300 The annual fixed costs total $570,000. Based on the data, solve the following problems: a. Calculate the number of package tours that must be sold to breakeven. b. Calculate the revenue needed to earn a target operating income of $102,000. c. If fixed costs increase by $19,000, what decrease in the variable cost per person must be achieved to maintain the breakeven point calculated in Problem a? d. The general manager at Outback Escapes proposes to increase the price of the package tour to $8,200 to decrease the breakeven point. Using the information in the original problem, calculate the new breakeven point. What factors should the general manager consider before deciding to increase the price of the package tour?

2. The Derby Shoe Company produces its famous shoe, the Divine Loafer, which sells for $70 per pair. The operating income for 2012 is as follows: Sales revenue ($70 per pair) $280,000 Variable cost ($30 per pair) $120,000 Contribution margin $160,000 Fixed cost $80,000 Operating income $80,000 MG523: Module 1 The Decision-Making Process and CVP Analysis 1.1 CVP Analysis 2 Derby Shoe Company would like to increase its profitability over the next year by at least 25%. To do so, the company is considering the following options: a. Replace a portion of its variable labor with an automated machining process. This would result in a 15% decrease in variable cost per unit, but a 10% increase in fixed costs. Sales would remain the same. b. Spend $20,000 on a new advertising campaign, which would increase sales by 40%. c. Increase both selling price by $10 per unit and variable costs by $8 per unit by using a higher quality leather material in the production of its shoes. The higher priced shoe would cause demand to drop by 15%. d. Add a second manufacturing facility, which would double Derbys fixed costs but would increase sales by 60%. Evaluate each of the alternatives considered by Derby Shoes. Do any of the options meet or exceed Derbys targeted increase in income of 25%? What should Derby do? Submission Requirements: Submit your response in a Microsoft Excel workbook. Show the detailed steps that you performed to solve the problem. Evaluation Criteria: The analysis will be evaluated using the Analysis rubric.