CVP analysis, changing revenues and costs. Sunny Spot Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Canadian Air. Sunny Spot’s fixed costs are $23,500 per month. Canadian Air charges passengers $1,500 per round trip ticket.
Calculate the number of tickets Sunny Spot must sell each month to (a) break even and (b) make a target operating income of $17,000 per month in each of the following independent cases.
1. Sunny Spot’s variable costs are $43 per ticket. Canadian Air pays Sunny Spot 6% commission on ticket price.
2. Sunny Spot’s variable costs are $40 per ticket. Canadian Air pays Sunny Spot 6% commission on ticket price.
3. Sunny Spot’s variable costs are $40 per ticket. Canadian Air pays $60 fixed commission per ticket to Sunny Spot. Comment on the results.
4. Sunny Spot’s variable costs are $40 per ticket. It receives $60 commission per ticket from Canadian Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.