Hey Chegg, I am having trouble with questions C and D. Could really use your hel
ID: 2487012 • Letter: H
Question
Hey Chegg, I am having trouble with questions C and D. Could really use your help. If you could please answer all parts of question C and D, show me step by step how you arrive at the answers and explain part iii for both questions C and D, it would help me a lot since I need it for an assignment. I really appreciate the help. Thanks.
Also, would it be possible to have one of your employees by the name of KP Gautam solve this problem since he did a great job answering a question and explaining it, in relation to CVP Analysis.
CVP (Cost-Volume-Profit) 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
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.
Explanation / Answer
Original Situation
Adventure Expeditions was having a loss.
C.
As the company's maximum capacity is 800 guide-days so fixed cost will not be incurred except the administrative cost which is mentioned.
i) Increase in revenues will be $3,375
ii) Increase in cost for:
a. Food is $375
b. Guide tour salary is $1,875
c. Supplies is $150
d. Administrative is $200
iii) Loss of the company is reduced by $ 775.
Per person/day 600 guide days Service Revenue 50 30000 Variable Costs Food 5 3000 Guide Salary 25 15000 Supplies 2 1200 Insurance 8 4800 Total VC 40 24000 Contribution Margin 10 6000 Fixed Costs Equipment Rental 5,000 5,000 Administration 5,000 5,000 Advertising 2,000 2,000 Total FC 12,000 12,000 Net Profit -6,000