Use the Information Below to Answer the Following Questions The Fixed Costs Have Been Shared Equally Between the Three

question 24

Multiple Choice

Use the information below to answer the following questions.
Travel Made Easy Ltd provides three services: International travel, Interstate travel, and Holiday Packages. The results for the year were as follows: $$\begin{array} { l r r c r } & \text { International } & \text { Interstate } & \text { Packages } & \text { Total } \\\hline\text { Revenue } & \$ 200,000 & \$ 200,000 & \$ 100,000 & \$ 500,000 \\\text { Variable costs } & \underline{ 50,000}& \underline{60,000} & \underline{40,000 }& \underline{ 150,000 }\\\text { Contribution } & 150,000 & 140,000 & 60,000 & 350,000 \\\text { Fixed costs } & \underline{90,000}& \underline{90,000} & \underline{90,000 }& \underline{270,000} \\\text { Net Profit } & \underline{\$ 60,000} & \underline{ \$ 50,000 }& \underline{ ( \$ 30,000 ) } & \underline{ \$ 80,000} \\\end{array}$$ The Fixed costs have been shared equally between the three functions.
-Refer to the table above. Assume that Travel Made Easy can sublet the space occupied by the Holiday Packages for $50,000 per annum. The best advice to management is:

• A)to close the service and save $40,000.
• B)do not close the service, because profit would decrease by $10,000.
• C)do not close the service, because profit would decrease by $40,000.
• D)to close the service, and the business would make a profit of $130,000.

---

Definitions:

Partial Payment

A payment that is made towards a bill or a debt that is not the full amount owed at that time.

Woolen Fabrics

Textile materials made from wool, characterized by their warmth, durability, and softness.

Cash Discount

A reduction in the price of an item for sale, offered in exchange for immediate payment or payment within a short period.

Partial Payment

A payment made that is less than the full amount due on a debt or obligation.