Chapter 3, Problem 3.23E

CVP analysis, changing revenues and costs. Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed costs are $23,500 per month. Hamilton Air charges passengers $1,500 per round-trip ticket.

Calculate the number of tickets Sunset must sell each month to (a) break even and (b) make a target operating income of $10,000 per month in each of the following independent cases.

1. 1. Sunset’s variable costs are $43 per ticket. Hamilton Air pays Sunset 6% commission on ticket price.

   Required

2. 2. Sunset’s variable costs are $40 per ticket. Hamilton Air pays Sunset 6% commission on ticket price.
3. 3. Sunset’s variable costs are $40 per ticket. Hamilton Air pays $60 fixed commission per ticket to Sunset. Comment on the results.
4. 4. Sunset’s variable costs are $40 per ticket. It receives $60 commission per ticket from Hamilton Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.