Question
Take-a-Break Travel Company offers spring break travel packages to college students. Two of its packages, a 5-day, 4-night trip to Cancun and a 7-day, 6-night
Take-a-Break Travel Company offers spring break travel packages to college students. Two of its packages, a 5-day, 4-night trip to Cancun and a 7-day, 6-night trip to Jamaica, have the following characteristics:
| Package Specifications | Cancun | Jamaica | Cost Data | ||||||||
| Oceanfront room; number of nights | 4 | 6 | $ | 20 | /night | ||||||
| Meals: | |||||||||||
| Breakfasts | 4 | 6 | $ | 5 | /ea | ||||||
| Lunches | 4 | 6 | $ | 8 | /ea | ||||||
| Dinners | 4 | 0 | $ | 10 | /ea | ||||||
| Scuba diving trips | 6 | 3 | $ | 17 | /ea | ||||||
| Water skiing trips | 8 | 4 | $ | 12 | /ea | ||||||
| Airfare (round trip from Miami) | 1 | 1 | $ | 215 | (Cancun), | ||||||
| $ | 290 | (Jamaica) | |||||||||
| Transportation to and from airport | 1 | 1 | $ | 17 | (Cancun), | ||||||
| $ | 12 | (Jamaica) | |||||||||
The Cancun trip sells for $750, and the Jamaica trip sells for $690, and both packages allow two bags to be checked for free.
Required:
1. What are the current profit margins on both trips?
2. Take-a-Breaks management believes that it must drop the price on the Cancun and Jamaica trips to $710 and $640, respectively, in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.
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Survey of Accounting
Authors: Carl S. Warren
7th edition
1285974360, 1285183487, 9781285974361, 978-1285183480
