Answer the Following Questions Using the Information Below

question 188

Multiple Choice

Answer the following questions using the information below:
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs.
-What is the contribution margin per ticket package?

• A) $50
• B) $100
• C) $150
• D) $200

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Definitions:

Net Present Value Rule

A financial principle stating that an investment should be made if its net present value is positive, considering the time value of money and all associated costs and revenues.

Market Value

The price in the market at which assets or services can currently be exchanged.

Investment's Cost

The total amount of money spent to acquire an investment, including all charges and fees associated with the purchase.

Average Accounting Return Rule

A capital budgeting criterion that measures the profitability of an investment as the average net income divided by the average book value.