I I need helpThank you in advance Problems 338 CVP analysis

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I need help.Thank you in advance.

Problems 3-38 CVP analysis, service firm. Lifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows: Airfare Hotel accommodations Meals Ground transportation Park tickets and other costs Total $1,600 3,100 600 300 700 $6,300 Annual fixed costs total $570,000. 1. Calculate the number of package tours that must be sold to break even. 2. Calculate the revenue needed to earn a target operating income of $102,000. 3. If fixed costs increase by $19,000, what decrease in variable cost per person must be achieved to main- tain the breakeven point calculated in requirement 1? The general manager at Lifetime Escapes proposes to increase the price of the package to decrease the breakeven point in units. Using information in the original problem new breakeven point in units. What factors should the general man increase the price of the package tour? tour to $8,200 , calculate the r consider before deciding to 4. age 3-39 CVP, target operating income, service firm. Spotted Turtle provides daycare for children M

Solution

Req 1. Selling price 7500 Less: variable cost 6,300 Contribution margin per person 1,200 Total Fixed cost 570000 Break even point in units: Total fixed cost/ Cm per person 570000/1200 = 475 persons Req 2: Desired contriibution: 570000+102000 =672000 Target sales in persons: Desired contribution/ CM per person 672000 /1200 = 560 persons Req 3: Total fixed cost revised: 570000+19000 =589000 Break even to remain same = 475 persons Contribution margin per person = 589000 /475 = 1240 Increase in CM per person = 1240-1200 = 40 Decrease in variable cost per person= $ 40 per person. Req 4: Selling price 8200 Less: variable cost 6,300 Contribution margin per person 1,900 Total Fixed cost 570000 Break even point in units: Total fixed cost/ Cm per person 570000/1900 = 300 persns The following factors to be considered: *Pprice elasticity of demand for the product. *Competitors price of the product *Any value addition provided compared to competitor.