# Pink Jeep Tours offers off-road tours to individuals and groups visiting the Southwestern U.S. hotspots of Sedona,

## Question:

Pink Jeep Tours offers off-road tours to individuals and groups visiting the Southwestern U.S. hotspots of Sedona, Arizona, and Las Vegas, Nevada. Take a tour of the company’s Web site at www.pinkjeep.com. Suppose you are the manager for the Pink Jeep office in Sedona. From the company Web site, choose two tours offered there. One tour should last all day, and the other should be a shorter tour of 2-4 hours.

For the following requirements, assume that each Jeep tour has four adult passengers plus a tour guide.

Required:

1. List the various costs Pink Jeep would incur to offer each tour. Indicate whether each cost identified is variable, fixed, or mixed based on the number of tours offered.

2. Briefly research each cost listed in requirement 1 and estimate its amount. Estimate variable costs on a per Jeep tour basis and fixed costs on a monthly basis. Break any mixed cost into variable and fixed components. State any assumptions that you must make when estimating these costs (and be aware that many assumptions must be made).

3. What is Pink Jeep’s total variable cost for each tour? Does this cost differ for each type of tour? Explain.

4. Using the current tour prices listed on Pink Jeep’s Web site, determine the contribution margin per Jeep tour for each tour type.

5. Assume Pink Jeep ran only the all-day excursion tour in the month of August. In this case, how many tours are needed to break even?

6. Assume Pink Jeep ran only the shorter tour during August. In this case, how many tours are needed to earn $$30,000$$ in profit for the month?

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