Question

Jolly Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Burlington Air. Jolly's fixed costs are $29,500 per month. Burlington Air charges passengers $1,600 per round-trip ticket. Read the requirement. Breakeven number of units = Next, select the formula to calculate the number of tickets needed to meet the target operating income. Quantity of units required to be sold = ( Now complete the requirement for each of the cases. Begin with case 1. Case 1: Jolly's variable costs are $42 per ticket. Burlington Air pays Jolly 10% commission on ticket price. Jolly must sell I tickets to break even and tickets to meet the target operating income. Case 2: Jolly's variable costs are $35 per ticket. Burlington Air pays Jolly 10% commission on ticket price. Jolly must sell | tickets to break even and tickets to meet the target operating income. Case 3: Jolly's variable costs are $35 per ticket. Burlington Air pays $55 fixed commission per ticket to Jolly. Comment on the results. Jolly must sell tickets to break even and tickets to meet the target operating income. V commission sizably the breakeven point and the number of tickets required to yield a target When comparing Case 3 to Case 2, the operating income of $18,000.

Answer 1

Break even number of units = total fixed costs/contribution margin per unit

Target operating income =(desired profit + fixed costs)/contribution margin per unit

Contribution margin per unit = revenue per unit- variable costs per unit

1

Break even units =29500/(1600*10%-42)

= 250 units

Target income =(18000+29500)/118

= 402.54 units

2.break even = 29500/(160-35) = 236

To meet operating income =380 tickets

3. Break even = 29500/20 = 1475 tickets

Operating income = 1045 tickets

Lower commission increased break even point

4.break even = 29500/25 = 1180 tickets

Operating income = 1900 tickets

IncreaseD CM

Lowers