Question 2:

Lifetime Escapes generates average revenue of $7970 per person on its 7-day package tours to wildlife parks in Zimbabwe. The variable costs per person are as follows:

Airfare

$1600

Hotel accommodations

3000

Meals

500

Ground transportation

400

Park tickets and other costs

500

Total

$6000

Annual fixed costs total $400000.

Required:

1. Calculate the number of package tours that must be sold to break even.
2. Calculate the revenue needed to earn a target profit of $100000.
3. If fixed costs increase by $19000, what decrease in variable cost per person must be achieved to maintain the break-even point calculated in requirement 1?
4. The general manager at Lifetime Escapes proposes to increase the price of the package tour to $8500 to decrease the break-even point in units. Using information in the original problem, calculate the new break-even point in units. What factors should the general manager consider before deciding to increase the price of the package tour?