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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.

Auditing: A Risk Based-Approach (MindTap Course List)
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter3: Internal Control Over Financial Reporting: Responsibilities Of Management And The External Auditor
Section: Chapter Questions
Problem 21RQSC
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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
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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