Hey Chegg, I need help with part E and F of this question. For Question E , can
ID: 2485689 • Letter: H
Question
Hey Chegg, I need help with part E and F of this question.
For Question E, can you find the correct answer for the cost to buy and the cost to make, which includes the cost to make food and the cost to make equipment rental and total costs. Also, for part i, can you explain the question: What is the advantage or disadvantage of buying? and for part 2, can you explain the question: Should the offer be accepted? Why?
For Question F
- can you find the correct answer for part i, which asks Calculate increase in revenue and the correct answers for part a and b
- can you find the correct answer for part ii, which asks for Additional costs: a. Full service and b. Current service
- For part iii, can you explain What is the advantage or disadvantage of selling without the inserts?
Can you please show me how you arrive at those answers. Please show me your work (step by step). I know that I am asking a lot. It is very important for me. I need to answer these questions for a final assignment. It would mean a lot if you can help me solve these questions with the full work (step by step) shown. Thank you so much for your help.
CVP Analysis
QUESTION #1: CVP ANALYSIS
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
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
In the existing plan: Cost to buy and Cost to make would be as follows:
Cost to Make
Cost to Buy
Variable cost
Per person
600 guide days
Per person
600 guide days
Food
5
3,000
7.50
4,500
Guide salary
25
15,000
25
15,000
Supplies
2
1,200
2
1,200
Insurance
8
4,800
8
4,800
Total
40
24,000
43
25,500
Fixed cost
Equipment rental
5,000
1,800
Administration
5,000
5,000
Advertising
2,000
2,000
Total
12,000
8,800
Total cost
36,000
34,300
Considering the change in activities, the increase in cost, cost to buy will be:
At $75 per guide day, revenue and net income will be:
a. Full service:
The company was incurring a loss of 6,000 in the current service, with the additional service and use of outside vendors, it can make a profit of 2,500 per month even though the variable cost per person has gine up to 55 anf fixed costs per month is at $9,800.
The company would be better off considering the offer of Alberta Outdoor supply company.
Cost to Make
Cost to Buy
Variable cost
Per person
600 guide days
Per person
600 guide days
Food
5
3,000
7.50
4,500
Guide salary
25
15,000
25
15,000
Supplies
2
1,200
2
1,200
Insurance
8
4,800
8
4,800
Total
40
24,000
43
25,500
Fixed cost
Equipment rental
5,000
1,800
Administration
5,000
5,000
Advertising
2,000
2,000
Total
12,000
8,800
Total cost
36,000
34,300