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Accounts: Service Sector Costing - Calculation of Impact on profit by ClassOf1

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Calculation of Impact on profit by selecting an option.

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									              Sub: Accounts                                                           Topic: Service Sector Costing



              Question:
              Calculation of Impact on profit by selecting an option.

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              Lakeshore Tours Inc., operates a large number of 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 in order to improve the company’s overall operating performance. One
              such tour is a two-day Battlefield of the French and Indian Wars bus tour. An income statement
              from one of these tours is given below:

                Ticket revenue
                (100 seats x 45% occupancy x $80 ticket price)      $3,600 100%
                Less variable expenses ($24 per person)              1,080 30%
                Contribution margin                                  2,520 70%
                Less fixed tour expenses:
                 Tour promotion                                  $620
                 Salary of bus driver                             400
                 Fee, tour guide                                  825
                 Fuel for bus                                     100
                 Depreciation of bus                 
								
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