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.

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Definitions:

TPS

An organizational Transaction Processing System operates as an information system that engages in the collection, storage, alteration, and retrieval of transaction activities.

Inventory Management

The practice of ordering, storing, using, and selling a company's inventory, which includes both raw materials and finished goods.

Quickbooks

An accounting software package developed by Intuit, designed for small and medium-sized businesses, offering on-premises accounting applications as well as cloud-based versions.

Interorganizational

Pertaining to the relationships or interactions between different organizations.