Solution 7.5 |
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a) The appropriate price to charge per holiday if the number of holidays sold and total profit remain the same for the forthcoming year.In the approach to part (a) of this question one must firstly calculate last years profit figure. This should be presented by way of a marginal costing statement as parts (b), (c), and (d) will require information on fixed costs, variable costs and contribution. Once last years profit is calculated then calculate the forthcoming years fixed and variable costs and by using the CVP formula one can calculate the price to charge that will maintain last years profit. Calculation of last years profit Profit Statement
By using the CVP formula p = P(x) - a + b(x) one can calculate a value for P
The price per holiday that will achieve a profit of €210,000 is €796.10
b) The number of holidays which must be sold if the existing selling price and total profit are maintainedThe approach to answer this part of the question is to use the required profit formula Fixed costs + required profit Contribution per unit This will give the number of packages sold to achieve the required profit
c) The number of holidays which must be sold to break-even if the price arrived at in a) is usedThe approach to answer this part of the question is to use the break-even formula and divide fixed costs by the contribution per unit. This will give the number of packages sold to break-even
d) The appropriate price to charge per holiday if a profit of €300,000 is required and if they succeed in selling 1,400 holidaysBy using the CVP formula p = P(x) - a + b(x) one can calculate a value for P
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