Question

Take-a-Break Travel Company offers spring break travel packages to college students. Two of its packages, a 4-day, 3-night trip to Cancun and a 8-day, 7-night trip to Jamaica, have the following characteristics: Package Specifications Cancun Jamaica Cost Data Oceanfront room; number of nights 3 7 $ 6 /night Meals: Breakfasts 3 7 $ 2 /ea Lunches 7 7 $ 9 /ea Dinners 8 0 $ 10 /ea Scuba diving trips 7 3 $ 18 /ea Water skiing trips 5 5 $ 13 /ea Airfare (round trip from Miami) 1 1 $ 250 (Cancun), $ 325 (Jamaica) Transportation to and from airport 1 1 $ 18 (Cancun), $ 13 (Jamaica) The Cancun trip sells for $1,000, and the Jamaica trip sells for $940, and both packages allow two bags to be checked for free. Required: 1. What are the current profit margins on both trips? 2. Take-a-Break’s management believes that it must drop the price on the Cancun and Jamaica trips to $950 and $900, respectively, in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.

Answer 1