Wembley Travel Agency specializes in flights between Los Angeles and London. It separates passengers from $900 per round-trip ticket on United Airlines. Until last month, United paid Wembley a commission of 10% of the ticket price paid by each passenger. This commission was Wembley's sole source of income. Wembley's fixed costs are $14,000 per month (for salaries, rent, etc.) and variable costs, such as sales commissions and bonuses, are $20 per ticket purchased per passenger. United Airlines just announced a revised payment schedule for all travel agents. It will now pay travel agents a 10% commission up to a maximum of $50 per ticket. Any ticket that costs more than $500 generates a commission of only $50, regardless of the ticket price. Wembley'

A. Under the old 10% commission structure, how many round trip tickets would Wembley need to sell each month to (a) breakeven and (b) generate $7,000 in operating income? (hint : calculate the number of breakeven tickets and the amount of tickets that need to be sold)

How does B. United's revised payment schedule affect your answers to (a) and (b) in condition 1? ( hint: calculate the number of break-even tickets and the amount of tickets that need to be sold)

Answer rating: 100% (QA)

Selling Price 90010 Variable Cost Contribution Fixed Cost 1a Breakeven number o... View the full answer