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

question 29

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. Management is contemplating closing the Holiday Packages service; this would involve a cost saving of $40,000 per annum, namely, the variable costs. The fixed costs are not expected to change. The best advice to management is:

• A)close the service, and the business would make a profit of $110,000.
• B)do not close the service, because profit would decrease by $60,000.
• C)close the service and save $40,000.
• D)do not close the service, because profit would decrease by $90,000.

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Definitions:

Charismatic Theory

A leadership perspective that emphasizes the ability of leaders to inspire and motivate followers through their personal charm, persuasion, and compelling vision.

Leadership

The action of leading a group of people or an organization.

Transformational Leadership

A leadership style that transforms followers to exceed their own self-interests for the good of the group, organization, or society through idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration.

Charismatic Leadership

A leadership style characterized by the ability to inspire and motivate others through personal charm, persuasion, and compelling vision.