Blueline tours inc operates tours throughout the united

Reference no: EM13568146

Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve the company's overall operating performance.

One such tour is a two-day Historic Mansions bus tour conducted in the southern states. An income statement from a typical Historic Mansions tour is given below:


Ticket revenue (105 seat capacity × 40% occupancy × $65 ticket price per person)	$	2,730	100	%
Variable expenses ($10.00 per person)		420	15.4

Contribution margin		2,310	84.6	%

Tour expenses:
Tour promotion	$	740
Salary of bus driver		330
Fee, tour guide		740
Fuel for bus		175
Depreciation of bus		490
Liability insurance, bus		240
Overnight parking fee, bus		60
Room and meals, bus driver and tour guide		185
Bus maintenance and preparation		290

Total tour expenses		3,250

Net operating loss	$	(940)

The following additional information is available about the tour:

a.	Bus drivers are paid fixed annual salaries; tour guides are paid for each tour conducted.
b.	The "Bus maintenance and preparation" cost is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the company's fleet of buses in good operating condition.
c.	Depreciation of buses is due to obsolescence. Depreciation due to wear and tear is negligible.
d.	Liability insurance premiums are based on the number of buses in the company's fleet.
e.	Dropping the Historic Mansions bus tour would not allow Blueline Tours to reduce the number of buses in its fleet, the number of bus drivers on the payroll, or the size of the maintenance and preparation staff.

Required:

By how much will the profits increase or decrease if this tour is discontinued? (Input the amount as a positive value.)

Profits would (Click to select)decreaseincrease by

Reference no: EM13568146

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