Sunrise

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

Oshawa

Air.

Sunrise's

fixed costs are

$28,500

per month.

Oshawa

Air charges passengers

$1,100

per round-trip ticket.

Read the

requirement

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Question content area bottom

Part 1

Begin by selecting the formula to calculate the breakeven points.

	Breakeven
	number of units	=

Part 2

Next, select the formula to calculate the number of tickets needed to meet the target operating income.

Quantity of units
required to be sold	= (		+		)

Part 3

Now complete the requirement for each of the cases. Begin with case 1.

Case 1:

Sunrise's

variable costs are

$36

per ticket.

Oshawa

Air pays

Sunrise

6%

commission on ticket price.

Sunrise must sell

tickets to break even and

tickets to meet the target operating income.

Part 4

Case 2:

Sunrise's

variable costs are

$28

per ticket.

Oshawa

Air pays

Sunrise

6%

commission on ticket price.

Sunrise must sell

tickets to break even and

tickets to meet the target operating income.

Part 5

Case 3:

Sunrise's

variable costs are

$28

per ticket.

Oshawa

Air pays

$47

fixed commission per ticket to

Sunrise.

Comment on the results.

Sunrise must sell

tickets to break even and

tickets to meet the target operating income.

Part 6

When comparing Case 3 to Case 2, the

decreased

increased

commission sizably

decreases

increases

the breakeven point and the number of tickets required to yield a target operating income of

$17,000.

Part 7

Case 4:

Sunrise's

variable costs are

$28

per ticket. It receives

$47

commission per ticket from

Oshawa

Air. It charges its customers a delivery fee of

$6

per ticket. Comment on the results.

Sunrise must sell

tickets to break even and

tickets to meet the target operating income.

Part 8

When comparing Case 4 to Case 3, the

$6

delivery fee results in a

higher

lower

contribution margin which

decreases

increases

both the breakeven point and the number of tickets sold to attain operating income of

$17,000.