Question-4

Travel Agency specializes in flights between Toronto and Peru. It books passengers on Toronto

Air. North's fixed costs are $35,000 per month. Toronto Air charges passengers $1,700 per

round-trip ticket.

Calculate the number of tickets North Travel must sell each month to (a) break even and (b)

make a target operating income of $17,000 per month in each of the following independent

cases.

Required:

1. North's variable costs are $33 per ticket. Toronto Air pays Sunset 5% commission on ticket

price.

2. North's variable costs are $37 per ticket. Toronto Air pays Sunset 7% commission on ticket

price.

3. North's variable costs are $53 per ticket. Toronto Air pays $68 fixed commission per ticket

to North. Comment on the results.

4. North's variable costs are $40 per ticket. It receives $60 commission per ticket from Toronto Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.