Mary is a travel agent. She intends to sell her customers a special round-trip airline ticket...
Question:
Mary is a travel agent. She intends to sell her customers a special round-trip airline ticket package. She is able to purchase the package from the airline carrier for $170 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Mary for any unsold ticket packages. Fixed costs include $5,140 in advertising costs. For every 135 round-trip airline ticket package sold, operating income will increase by
A) $34,000
B) $27,000
C) $4,050
D) $22,950
Cost-Volume-Profit (CVP) Analysis:
The CVP analysis for a firm is usually conducted by considering metrics like the contribution margin per unit and contribution margin ratio. CVP analysis aims to figure out the units and sales dollars required for a targeted operating income.
Answer and Explanation: 1
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View this answerThe correct answer is option C) $4,050.
Explanation:
The operating income will be equal to the total contribution margin earned. The contribution...
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Cost-Volume-Profit Analysis: Definition & Examples
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Chapter 3 / Lesson 3
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Cost-volume profit analysis identifies the ideal production and pricing standards to reach company goals by comparing the cost to sales volume. Learn the formula for this analysis and the inclusion of contribution margin ratios in decision-making.
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