Answered step by step
Verified Expert Solution
Question
1 Approved Answer
process required Q1b. Cleartrip Travel Agency specializes in flights between Los Angeles and London. It books passengers on United Airlines at $1200 per round-trip ticket
process required Q1b. Cleartrip Travel Agency specializes in flights between Los Angeles and London. It books passengers on United Airlines at $1200 per round-trip ticket United paid Cleartrip a commission of 12% of the ticket price paid by each passenger. This commission was Cleartrip's only source of revenues. Cleartrip's fixed costs are $20,000 per month for salaries, rent and so on), and its variable costs, such as sales commissions and bonuses. are $29 per ticket purchased for a passenger United Airlines has just announced a tevised payment schedule for all travel agents. It will now pay travel agents a 10% commission per ticket up to a maximum of 570. Any ticket costing more than $500 generates only a $70 commission, regardless of the ticket price. Cleartrip's managers are concerned about how United's new payment schedule will affect its breakeven point and profitability. Required: a) Show the impact of change in commission structure on break even units and break even revenue for Cleartrip b) If Cleartrip needs a minimum profit of $5000 per month (560,000 per annum) what is the number of tickets it needs to sell under the two commission structures (5+5 = 10)
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