ABC Corporation has hired you to help with their accounting. ABC is a wilderness adventure company in Whitehorse, YT. They operate from May 1^st to September 30^th each year, providing tourists with guided wilderness adventures. The owner, Daniel, asks you to help develop pricing for the new season because last year he made less money then he thought. Daniel gives you the following information he used to come up with pricing:

• Uses home office space
• Hires a university student as a guide paying the student $200 per day plus $10 per customer per day
• Purchased canoes, tents, cooking equipment, backpacks and safety equipment totalling $15,000 (assume 5 year life for equipment). Enough equipment for 10 people (including the guide).
• Contracted with a local caterer to provide meal kits. The catering contract is for $35 per day per person.
• Daniel wants to make $25,000 profit each season.
• ABC offers two packages, 3 day adventures and 7 day adventures.
• Daniel estimated that the average group would be 4 people, and that he could sell 8 adventures in the first year (5 x 3 day adventures and 3 x 7 day adventures)

Labour (5 x 3 + 3 x 7) x 200 + 36 x 4 x 10	8,640
Food (36 x 4 x 35)	5,040
Equipment	15,000
Profit	25,000
Total	53,640
Total days and people 144	372.50 per day
3 day adventure $372.50 x 3	$1,117.50
7 day adventure $372.50 x 7	$2,607.50

You just finished preparing the financial statements for ABC Company which were as follows. The sales were less than originally expected. There were 16 x 3 day adventures and 4 x 7 day adventures. It totalled 4 separate 3 day adventures and 1 separate 7 day adventure

ABC Company

Income Statement

For the year ending December 31, 2019

Revenue                                                           $28,310

Labour                                                                   4,560

Food                                                                      2,850

Depreciation                                                       3,000

Profit                                                                 $17,900

Daniel thinks he should raise his prices so he can reach his target of $25,000 profit this year. You charge Daniel $12,000 per year for accounting ($1,000 per month).

To help attract customers, Daniel only charges 10% of his fees up front. Daniel collected from customers as follows: 70% at 30-60 days and 20% 60-90 days.

Daniel has agreed to pay his labour the day the group returns. And has to pay for food before the adventure begins. Contracts remain the same for the current season.

Tourists gave great reviews last year and Daniel is already receiving bookings for the upcoming season. There is 2 groups of 4 people that have booked 3 day adventures and 1 group of 5 people that booked a 7 days adventure. Daniel expected to book a total of 24 x 3 day adventures and 13 x 7 day adventures.

Prepare a memo to Daniel with a recommendation. Provide support for your recommendation.

Answer rating: 100% (QA)

answers Guide fees 200 per day 10 per customer per day Equipments 15000 5 year life for 10 people Catering cost 35 per day per person Expected profit ... View the full answer