ASA Tours operates a network of offices around the globe specializing in local tours given by local residents and academics. Depending on the year, it operates at between 60 and 70 percent of capacity, which consists of locals who meet the criteria required by ASA. ASA operates three types of tours. Web-based tours consist of live-stream broadcasts with a limit of 15 participants. Group tours consist of small groups of no more than eight people. Finally, there are individual tours, which are personalized tours for no more than six people. Segmented income statements for a typical month appear as follows: Routes Sales Group $ 270,600 214,300 86,592 Variable costs Fixed costs allocated to tours Operating profit (loss) Web-Based $ 102,800 21,100 32,896 $ 48,884 $ (30,292) Individual $ 176,600 99,300 56,512 $ 20,788 ASA is considering dropping the group tours. If these tours are dropped, the revenue associated with the tours would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 35 percent. Required: a-1. Prepare a differential cost schedule. a-2. Should ASA Tours drop the group tours? b. Are there other factors you would recommend ASA Tours consider before making the decision? Complete this question by entering your answers in the tabs below.
ASA Tours operates a network of offices around the globe specializing in local tours given by local residents and academics. Depending on the year, it operates at between 60 and 70 percent of capacity, which consists of locals who meet the criteria required by ASA. ASA operates three types of tours. Web-based tours consist of live-stream broadcasts with a limit of 15 participants. Group tours consist of small groups of no more than eight people. Finally, there are individual tours, which are personalized tours for no more than six people. Segmented income statements for a typical month appear as follows: Routes Sales Group $ 270,600 214,300 86,592 Variable costs Fixed costs allocated to tours Operating profit (loss) Web-Based $ 102,800 21,100 32,896 $ 48,884 $ (30,292) Individual $ 176,600 99,300 56,512 $ 20,788 ASA is considering dropping the group tours. If these tours are dropped, the revenue associated with the tours would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 35 percent. Required: a-1. Prepare a differential cost schedule. a-2. Should ASA Tours drop the group tours? b. Are there other factors you would recommend ASA Tours consider before making the decision? Complete this question by entering your answers in the tabs below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:ASA Tours operates a network of offices around the globe specializing in local tours given by local residents and academics.
Depending on the year. It operates at between 60 and 70 percent of capacity, which consists of locals who meet the criteria required
by ASA. ASA operates three types of tours. Web-based tours consist of live-stream broadcasts with a limit of 15 participants. Group
tours consist of small groups of no more than eight people. Finally, there are individual tours, which are personalized tours for no more
than six people.
Segmented Income statements for a typical month appear as follows:
Routes
Sales
Variable costs
Fixed costs allocated to tours
Operating profit (loss)
Web-Based
$ 102,800
21,100
32,896
$ 48,884 $ (30,292)
ASA is considering dropping the group tours. If these tours are dropped, the revenue associated with the tours would be lost and the
related variable costs saved. In addition, the company's total fixed costs would be reduced by 35 percent.
Required:
a-1. Prepare a differential cost schedule.
a-2. Should ASA Tours drop the group tours?
b. Are there other factors you would recommend ASA Tours consider before making the decision?
Complete this question by entering your answers in the tabs below.
Revenue
Less: Variable costs
Group
$ 270,600
214,300
86,592
Contribution margin
Less: Fixed costs
Operating profit (loss)
Required al Required a2 Required b
Prepare a differential cost schedule.
Note: Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.)
Status Quo
Individual
$ 176,600
99,300
56,512
$ 20,788
Alternative:
Drop
Group Tours
Difference
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