Question

Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on OshawaOshawa Air. SunsetSunset​'s fixed costs are $29,500 per month. OshawaOshawa Air charges passengers $1,600 per​ round-trip ticket. Read the requiremennt.

Calculate the number of tickets

SunsetSunset must sell each month to​ (a) break even and​(b) make a target operating income of $12,000 per month in each of the following independent cases. ​(Round up to the nearest whole number. For​ example, 10.2 should be rounded up to​ 11.)

1.	SunsetSunset​'s variable costs are $42 per ticket.OshawaOshawa Air pays Sunset10​% commission on ticket price.
2.	SunsetSunset​'s variable costs are $35per ticket.OshawaOshawa Air pays Sunset10​% commission on ticket price.
3.	SunsetSunset​'s variable costs are $35 per ticket. OshawaOshawa Air pays $55 fixed commission per ticket to Sunset.Comment on the results.
4.	SunsetSunset​'s variable costs are $35per ticket. It receives $55 commission per ticket from OshawaOshawa Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.

Begin by selecting the formula to calculate the breakeven points. Breakeven number of units = Fixed costs / Contribution margin per unit ​Next, select the formula to calculate the number of tickets needed to meet the target operating income. Quantity of units required to be sold = ( Fixed costs + Target operating income ) / Contribution margin per unit Now complete the requirement for each of the cases. Begin with case 1. Case​ 1: SunsetSunset​'s variable costs are $ 42 per ticket. OshawaOshawa Air pays SunsetSunset 1010​% commission on ticket price. Sunset must sell ()tickets to break even and ()tickets to meet the target operating income.

Case​ 2: SunsetSunset​'s variable costs are $ 35$35 per ticket. OshawaOshawa Air pays SunsetSunset 1010​% commission on ticket price.

Sunset must sell() tickets to break even and() tickets to meet the target operating income.

Case​ 3: SunsetSunset​'s variable costs are $ 35$35 per ticket. OshawaOshawa Air pays $ 55$55 fixed commission per ticket to SunsetSunset. Comment on the results.

Sunset must sell ()tickets to break even and *(tickets to meet the target operating income.

When comparing Case 3 to Case​ 2, the ▼ commission sizably ▼ decreases increases the breakeven point and the number of tickets required to yield a target operating income of $ 12 comma 000$12,000.

Case​ 4: SunsetSunset​'s variable costs are $ 35$35 per ticket. It receives $ 55$55 commission per ticket from OshawaOshawa Air. It charges its customers a delivery fee of $ 5$5 per ticket. Comment on the results.

Sunset must sell() tickets to break even and ()tickets to meet the target operating income.

When comparing Case 4 to Case​ 3, the $ 5$5 delivery fee results in a ▼ higher lower contribution margin which ▼ decreases increases both the breakeven point and the number of tickets sold to attain operating income of $ 12 comma 000$12,000.

Answer 1

1a)	Selling Price = Commission = $1600*10% =$160
	Variable cost =$42
	Contribution Margin = Selling Price - Variable Cost = $160-$42 = $118
	Break even Tickets = Fixed cost/ Contribution per ticket = $29500/$118 =250 tikckets
1b)	No of Tickets to be sold = Fixed cost + Target Income/ Contribution per ticket
	= $29500+$12000/$118 = $41500/$118 = 352 tickets
2a)	Selling Price = Commission = $1600*10% =$160
	Variable cost =$35
	Contribution Margin = Selling Price - Variable Cost = $160-$35 = $125
	Break even Tickets = Fixed cost/ Contribution per ticket = $29500/$125 = 236 tikckets
2b)	No of Tickets to be sold = Fixed cost + Target Income/ Contribution per ticket
	= $29500+$12000/$125 = $41500/$125 = 332 tickets
3a)	Selling Price = Commission = $55
	Variable cost =$35
	Contribution Margin = Selling Price - Variable Cost = $55-$35 = $20
	Break even Tickets = Fixed cost/ Contribution per ticket = $29500/$20 = 1475 tikckets
3b)	No of Tickets to be sold = Fixed cost + Target Income/ Contribution per ticket
	= $29500+$12000/$20 = $41500/$20 = 2075 tickets
	The reduction in commission increases the breakeven point and the number of tickets sizably.

	(Requirement 2)
	10% Commission	Fixed Commission
Breakeven point	236	1475
Target income of $12000	332	2075

4a)	Selling Price = Commission = $55+$5 =$60
	Variable cost =$35
	Contribution Margin = Selling Price - Variable Cost = $60-$35 = $25
	Break even Tickets = Fixed cost/ Contribution per ticket = $29500/$25 = 1180 tikckets
4b)	No of Tickets to be sold = Fixed cost + Target Income/ Contribution per ticket
	= $29500+$12000/$25 = $41500/$25 = 1660 tickets

The delivery fee of $5 will lead to higher contribution margin which both reduced the breakeven point and no of tickets sold to achieve $12000 operating income.