As expected, since I am having difficulty with the first part of this question i

Question

As expected, since I am having difficulty with the first part of this question it is assumed I will have a problem with the next part.

2. The company's tour director has been criticized because only about 50% of the seats on Blueline's tours are being filled as compared to an industry average of 60%. The tour director has explained that Blueline's average seat occupancy could be improved considerably by eliminating about 10% of its tours, but that doing so would reduce profits. Explain how this could happen.

Explanation / Answer

If the company drops tours with lower-than-average seat occupancy, it could increase its average seat occupancy. However, if the tours that are eliminated have a positive contribution margin (exceeds costs), it will reduce the company’s profits. Additionally, some of these tours could act as the gateway in getting customers interested in tours that are more profitable.

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