Blueline Tours, Inc, operates tours throughout the United States. A study has in
ID: 2468585 • Letter: B
Question
Blueline Tours, Inc, operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve the company's overall operating performance One such tour is a two-day Historic Mansions bus tour conducted in the southem states. An income statement from a typical Historic Mansions tour is given below Ticket revenue (115 seat capacity 40% occupancy x $70 ticket price per person) Variable expenses ($18.00 per person) 3,220 828 25.7 2.392 743% $ 100% Contribution margin Tour expenses Tour promotion Salary of bus driver Fee, tour guide Fuel for bus Depreciation of bus Liability insurance, bus Overnight parking fee, bus Room and meals, bus driver and tour guide Bus maintenance and preparation S 730 350 680 160 530 180 60 195 270 3,155 Total tour expenses Net operating loss s (763) The following additional information is available about the tourExplanation / Answer
Fixed cost will be incurred if the tour is continued or discontinued so irrevalnat Salary Of Bus Driver 350 Bus maintainence aand preparations 270 Depreciation of Buss 530 Liability Insurance 180 Total 1330 Relevant cost and revemue Contribution Margin 2392 Less: Relevant cost associated with tour Tour promotion 730 Fee, tour guide 680 Fuel for the bus 160 Overnight parking fees 60 Room and meals, bus driver, guide 195 1825 Income 567 Profit will decrease by $567 if the tour is discontinued