Sunshine Tours is a travel agency specializing in flights between Seattle and Ja

Question

Sunshine Tours is a travel agency specializing in flights between Seattle and Jamaica. It books passengers on Canadian Air. Canadian Air charges passengers $1,000 per round- trip ticket. Sunshine receives a commission of 80% of the ticket price paid per passenger. Sunshine's fixed costs are $22,000 per month. Its variable costs are $35 per ticket, including an S18 delivery fee by Emory Express. (Assume each ticket purchased is delivered in a separate package. Thus, the delivery fee applies to each ticket). REQUIRED: (1) What is the number of tickets Sunshine must sell each month to Breakeven (rounded to the nearest dollar). Make a target profit of $9,992 (round to the nearest dollar) a. b. (2) Assume another company, TNT Express, offers to charge Sunshine only $12 per ticket delivered and Sunshine believes the fixed cost can be reduced by $104. How would accepting this offer affect your breakeven and what would that new breakeven be? (3) Returning to the original facts- assume Sunshine Tours decides to charge its customers a delivery fee of $5 per ticket. How would this change affect your break even point and units sold to reach a target profit of $9,992?

Explanation / Answer

Ans for 1 (a) revenue per ticket = 1000*8% = $80

Variable cost = $35 per ticket

Contribution = $80-$35 = $45 per ticket

Fixed cost = $22000

Break Even point = 22000/45 = 489 tickets

(B)

Making a target profit of $ 9992 = (9992+22000)/45 = 711 tickets

Ans for part 2

If varialbe cost reduce then breakeven cost will be reduced.

New variable cost = 35-6 = $29

Contribution = 80-29 = $51

Breakeven sales = (22000-104)/51= 430 tickets

Ans for part 3

If comoaco will charge $5 then its revenue and contribution will increase by $5 so contribution will be 45+5=$50

Quantity to be sold for profit of $9992 = (9992+22000)/50= 640 tickets

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