Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: P400 Selling price per membership Variable costs per membership Contribution margin 270 130 Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P150,000 70,000 25,000 50,000 If they continue operating, the company will demand for the club is 4,000 memberships. forced to reduce membership selling price by 12.50%. The

Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: P400 Selling price per membership Variable costs per membership Contribution margin 270 130 Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P150,000 70,000 25,000 50,000 If they continue operating, the company will demand for the club is 4,000 memberships. forced to reduce membership selling price by 12.50%. The

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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