) Wembley Travel Agency specializes in flights between Los Angeles and London. It books passengers on United Airlines at $900 per round-trip ticket. Until last month, United paid Wembley a commission of 10% of the ticket price paid by each passenger. This commission was Wembleys only source of revenues. Wembleys fixed costs are $14,000 per month (for salaries, rent, and so on), and its variable costs, such as sales commissions and bonuses, are $20 per ticket purchased for a passenger. United Airlines has just announced a revised payment schedule for all travel agents. It will now pay travel agents a 10% commission per ticket up to a maximum of $50. Any ticket costing more than $500 generates only a $50 commission, regardless of the ticket price. Wembleys managers are concerned about how Uniteds new payment schedule will affect its breakeven point and profitability.

a. Under the old 10% commission structure, how many round-trip tickets must Wembley sell each month (a) to break even and (b) to earn an operating income of $7,000? (clue: calculate breakeven number of tickets and quantity of tickets required to be sold )

b. How does Uniteds revised payment schedule affect your answers to (a) and (b) in requirement 1? ( clue: calculate breakeven number of tickets and quantity of tickets required to be sold)