Relevant Cost: Analysis of Profits
Not what you're looking for?
Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve the company's overall operating performance.
One such tour is a two-day Historic Mansions bus tour conducted in the southern states. An income statement from a typical Historic Mansions tour is given below:
*see attached file for data
The following additional information is available about the tour:
a. Bus drivers are paid fixed annual salaries; tour guides are paid for each tour conducted.
b. The "Bus maintenance and preparation" cost is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the company's fleet of buses in good operating condition.
c. Depreciation of buses is due to obsolescence. Depreciation due to wear and tear is negligible.
d. Liability insurance premiums are based on the number of buses in the company's fleet.
e. Dropping the Historic Mansions bus tour would not allow Blueline Tours to reduce the number of buses in its fleet, the number of bus drivers on the payroll, or the size of the maintenance and preparation staff.
Required:
By how much will the profits increase or decrease if this tour is discontinued? (Input the amount as a positive value.)
Profits would by $
Purchase this Solution
Solution Summary
The solution gives detailed steps on calculating the profits. All formula and calculations are shown and explained.
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Operations Management
This quiz tests a student's knowledge about Operations Management
Motivation
This tests some key elements of major motivation theories.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.