Hey Chegg, this question has been already been answered by you guys, but there i
ID: 2484957 • Letter: H
Question
Hey Chegg, this question has been already been answered by you guys, but there is 2 different answers. You mind helping me find the correct answers. Can you show your work at how you arrived at those correct answers. Please show the full work for questions 1 and 2 and questions A through F. It would help me a lot. Thank you.
Adventure Expeditions offers guided back-country hiking/camping trips in Colombia Andes. Adventure provides a guide and all necessary food and equipment at a fee of $50 per person per day. Adventure currently provides an average of 600 guide-days per month in June, July, August, and September. Based on available equipment and staff, maximum capacity is 800 guide-days per month. Monthly variable and xed operating costs are as follows:
Variable Costs Per Person Fixed Costs
Food $ 5 Equipment rental $ 5,000
Guide salary 25 Administration 5,000
Supplies 2 Advertising 2,000
Insurance 8 Total $12,000
Total $ 40
Required
1. Calculate the contribution margin per person per ride.
2. Determine the effect of each of the following situations on monthly prots. Each situation is to be evaluated independently of all others.
A. A $12 increase in the daily fee should result in a 150-unit decrease in monthly sales.
i) Calculate profit decrease from reduced tours if there was no price increase or costs
ii) Calculate profit increase from increase in selling price
iii) Show the increase or decrease in monthly profit.
B. A $7 decrease in the daily fee should result in a 300-unit increase in monthly sales. However, because of capacity constraints, the last 100 guide-days would be provided by subcontracting to
another rm at a cost of $46 per guide-day.
i) Calculate profit increase from increased tours with no changes in prices or costs
ii) Calculate profit decrease from reduction in selling price for all tours
iii) Calculate profit decrease from increase cost of the last 100 tours
iv) Show the increase or decrease in monthly profit.
C. A French tour agency has proposed to place a special, one-time order for 75 guide-days at a reduced fee of $45 per guide-day. The agency would pay all insurance costs. There would be additional xed administrative costs of $200.
i) Calculate the increase in revenues
ii) Calculate the increase in cost for:
a. Food
b. Guide tour salary
c. Supplies
d. Administrative
iii) Show increase or decrease in profits.
D. An Italian tour agency has proposed to place a special, one-time order for 300 guide-days next month at a special fee of $40 per guide-day. The agency would pay all insurance costs. There would
be additional xed administrative costs of $200. Assume additional capacity beyond 800 guide-days is not available.
i) Calculate the increase in revenues
ii) Calculate the increase in cost for:
a. Food
b. Guide tour salary
c. Supplies
d. Administrative
e. Opportunity cost of lost regular sales
iii) Show increase or decrease in profits.
E. An Alberta outdoor supply company has offered to supply all necessary food and camping equipment at $7.50 per guide-day. This eliminates the current food costs and reduces the monthly equipment rental costs to $1,800.
Cost to make Cost to buy
Cost to buy
Cost to make:
Food
Equipment rental
Total Costs
i) What is the advantage or disadvantage of buying
ii) Should the offer be accepted? Why?
F. Clients currently must carry a backpack and assist in camp activities such as cooking. Adventure is considering the addition of mules to carry all food and equipment and the hiring of college students to perform camp activities such as cooking. This will increase variable costs by $12 per guide-day and xed costs by $1,000 per month. However, 600 full-service guide-days per month could now be sold at $75 each.
i) Calculate increase in revenue:
a. Full service
b. Current service
ii) Additional costs
a. Variable
b. Fixed
iii) What is the advantage or disadvantage of selling without the inserts.
Explanation / Answer
food and equip 50 per person per day current 600 guide per day in a month max 800 guide per day in a month 1) VC per person FC food 5 Equipment rental 5000 guide salary 25 Administration 5000 supplies 2 Advertising 2000 insurance 8 Total 12000 Total Variable cost 40 SP 50 contribution margin 10 per person per ride rides 600 total contribution 6000 FC 12000 loss -6000 2) A) SP 62 57 VC 40 40 contribution margin 22 17 sales 450 900 total contribution 9900 15300 FC 12000 12000 Loss/profit -2100 3300 Increase -3900