Homework Help is Here – Start Your Trial Now!
Business
Accounting
Required: a. What annual operating income can WSM expect from this new service? b-1. WSM is considering selling tickets over the Internet to save on commissions and other costs. It is estimated that the cost driver rate for flights would decrease by $100 as a result of Internet sales. Administrative and other marketing costs would increase by $1 million. WSM estimates that the added convenience would generate a 5 percent increase in demand. All other costs and fares would remain the same. What annual operating income can WSM expect from adopting Internet ticket sales? b-2. Would you recommend that WSM adopt Internet ticket sales?

Required: a. What annual operating income can WSM expect from this new service? b-1. WSM is considering selling tickets over the Internet to save on commissions and other costs. It is estimated that the cost driver rate for flights would decrease by $100 as a result of Internet sales. Administrative and other marketing costs would increase by $1 million. WSM estimates that the added convenience would generate a 5 percent increase in demand. All other costs and fares would remain the same. What annual operating income can WSM expect from adopting Internet ticket sales? b-2. Would you recommend that WSM adopt Internet ticket sales?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

WSM Corporation, Need assistance with  Req A, Req B1, Req B2

WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days x 4 flights per day). WSM has hired determine activity-based costs for this operation. The consultant's report shows the following. consultant to Activity Measure (cost Unit Cost(cost per unit of Activity Flying and maintaining aircraft Serving passengers Advertising and marketing driver) Number of flights Number of passengers Number of promotions activity) $ 1,300 per flight 5 per passenger $48,000 per promotion WSM estimates the following annual information. With 13 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $190. The lease of the 60-seat aircraft will cost $3,600,000. Other equipment costs will be $1,800,000. Administrative and other marketing costs will be $1,000,000. Required: a. What annual operating income can WSM expect from this new service? b-1. WSM is considering selling tickets over the Internet to save on commissions and other costs. It is estimated that the cost driver for flights would decrease by $100 as a result of Internet sales. Administrative and other marketing costs would increase by $1 rate million. WSM estimates that the added convenience would generate a 5 percent increase in demand. All other costs and fares would remain the same. What annual operating income can WSM expect from adopting Internet ticket sales? b-2. Would you recommend that WSM adopt Internet ticket sales? - Assume manao that WSM management decides not to adopt the Internet strategy, regardless of your answer to requirement (b). Instead, it is now considering a plan to sell tickets at two prices. An unrestricted ticket (good for travel at any time on any day) would sell for $ discount ticket, good for reservations made in advance, would sell for $145. Management estimates that it can sell 35,000 C. now concider 215. A tickets (25 per flight) at the unrestricted airfare of $215. All other data remain the same. Ignoring the information in requirement (b), how many discounted tickets would WSM have to sell annually to earn an operating income of $1,600,000? Assume that the annual number of flights remains at 1,400 and that the discounted tickets would be evenly divided across the 1,400 flights. Complete this question by entering your answers in the tabs below. Reg A Reg B1 Req B2 Reg C What annual operating income can WSM expect from this new service? (Enter your answer in thousands of dollars.) Operating income < Reg A Req B1 >
Transcribed Image Text:WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days x 4 flights per day). WSM has hired determine activity-based costs for this operation. The consultant's report shows the following. consultant to Activity Measure (cost Unit Cost(cost per unit of Activity Flying and maintaining aircraft Serving passengers Advertising and marketing driver) Number of flights Number of passengers Number of promotions activity) $ 1,300 per flight 5 per passenger $48,000 per promotion WSM estimates the following annual information. With 13 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $190. The lease of the 60-seat aircraft will cost $3,600,000. Other equipment costs will be $1,800,000. Administrative and other marketing costs will be $1,000,000. Required: a. What annual operating income can WSM expect from this new service? b-1. WSM is considering selling tickets over the Internet to save on commissions and other costs. It is estimated that the cost driver for flights would decrease by $100 as a result of Internet sales. Administrative and other marketing costs would increase by $1 rate million. WSM estimates that the added convenience would generate a 5 percent increase in demand. All other costs and fares would remain the same. What annual operating income can WSM expect from adopting Internet ticket sales? b-2. Would you recommend that WSM adopt Internet ticket sales? - Assume manao that WSM management decides not to adopt the Internet strategy, regardless of your answer to requirement (b). Instead, it is now considering a plan to sell tickets at two prices. An unrestricted ticket (good for travel at any time on any day) would sell for $ discount ticket, good for reservations made in advance, would sell for $145. Management estimates that it can sell 35,000 C. now concider 215. A tickets (25 per flight) at the unrestricted airfare of $215. All other data remain the same. Ignoring the information in requirement (b), how many discounted tickets would WSM have to sell annually to earn an operating income of $1,600,000? Assume that the annual number of flights remains at 1,400 and that the discounted tickets would be evenly divided across the 1,400 flights. Complete this question by entering your answers in the tabs below. Reg A Reg B1 Req B2 Reg C What annual operating income can WSM expect from this new service? (Enter your answer in thousands of dollars.) Operating income < Reg A Req B1 >
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS