Javelin Cycling Vacations Ltd. offers cycling tours in Canada and France. Each year a single tour is
Question:
Javelin Cycling Vacations Ltd. offers cycling tours in Canada and France. Each year a single tour is offered. For 20X5, the company is offering a tour of the Continental Divide. Following is an estimate of the revenues and costs for this tour:
JAVELIN CYCLING VACATIONS LTD.
Continental Divide Tour
Revenue and Expenses Forecast for 20X5
Revenue .................................................................... $170,000
Expenses:
Tour guide salaries1 ................................................. $ 48,000
Promotion2 ................................................................... 12,000
Gratuities 8,000
Office and equipment insurance3 ................................ 2,000
Group accident and life insurance4 .............................. 7,000
Depreciation ..................................................................... 8,000
Tour support employee salaries1 ............................... 28,000
Bicycle maintenance ...................................................... 7,000
Customer meals ........................................................... 20,000
Hotel and camping costs ............................................. 20,000
Administrative and office expense5 ............................ 3,000
Tour coordinator salary .............................................. 30,000
Total expenses .......................................................... 193,000
Net operating income (loss) .................................. $ (23,000)
Required:
1. Indicate whether the tour should be offered. Provide calculations in support of your response.
2. Calculate the minimum revenue required to justify offering the tour.
Step by Step Answer:
Introduction to Managerial Accounting
ISBN: 978-1259105708
5th Canadian edition
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan