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UTHM Student's Club is considering to chartering a bus for 2 days 1 night of Sibu Island’s trip after their final examination
UTHM Student's Club is considering to chartering a bus for 2 days 1 night of Sibu Island’s trip after their final examination. The cost required for the trip includes transportation, accommodation and food as listed below: Bus rental : Chalet : Food and beverages : Boat fare (one way) : RM 250 per day RM 100 per twin sharing room RM 50 per person RM 30 per person
(a) Establish an equation to estimate the total expenses for the trip. You may provide any logical appropriate assumption (if required). (14 marks)
(b) If the bus capacity is 40 seats and the organizer offers a package of RM 200 per person for the trip. Calculate the maximum profit that could be gained by the club. (8 marks)
(c) The club decided to cancel the trip if the trip is unprofitable. So, how many minimum numbers of packages need to be sold to ensure the trip can proceed as planned? (5 marks)
Expert Solution
a) First determine fixed and variable costs
Fixed costs = 2 day fare for the bus = 2*250 = 500
Variable costs (per person) = Chalet 100/2 (assuming one night rent divided by two persons), Food 50, and Boat fare 60 (30 one way times 2) = 50+50+60 = 160 per person
Total expenses for X persons = 500 + 160X
b) If the package is for 200 per person, then the profit equation will be: Revenue - Expenses
= 200X - (500+160X)
If the bus is to full capacity, i.e., 40 persons, then
Profit = 200*40 - (500 + 160*40) = 1,100
c) The trip can go on if the fixed costs are reocovered
Contribution margin = Package price - Variable costs = 200 - 160 = 40
We need minimum 500/40 = 12.5 (or say 13) persons to go on the trip for the organizer not to incur losses.
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