CVP analysis, service firm. Lifetime Escapes generates average revenue of $5,000 per person on its five day package tours to wildlife parks in Kenya. The variable costs per person are as follows:
|
Airfare |
$1,400 |
|
Hotel accommodations |
1,100 |
|
Meals |
300 |
|
Ground transportation |
100 |
|
Park tickets and other costs |
800 |
|
Total |
$3,700 |
Annual fixed costs total $520,000.
1. Calculate the number of package tours that must be sold to break even.
2. Calculate the revenue needed to earn a target operating income of $91,000.
3. If fixed costs increase by $32,000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in requirement 1?