Take-a-Break Travel Company offers spring break travel packages to college students. Two of its packages, a 6-day, 5-night trip to Cancun and a 6-day, 5-night trip to Jamaica, have the following characteristics:
| Package Specifications | Cancun | Jamaica | Cost Data | ||||||||
| Oceanfront room; number of nights | 5 | 5 | $ | 25 | /night | ||||||
| Meals: | |||||||||||
| Breakfasts | 5 | 5 | $ | 5 | /ea | ||||||
| Lunches | 3 | 5 | $ | 4 | /ea | ||||||
| Dinners | 4 | 0 | $ | 10 | /ea | ||||||
| Scuba diving trips | 4 | 4 | $ | 19 | /ea | ||||||
| Water skiing trips | 9 | 6 | $ | 14 | /ea | ||||||
| Airfare (round trip from Miami) | 1 | 1 | $ | 195 | (Cancun), | ||||||
| $ | 270 | (Jamaica) | |||||||||
| Transportation to and from airport | 1 | 1 | $ | 19 | (Cancun), | ||||||
| $ | 14 | (Jamaica) | |||||||||
The Cancun trip sells for $750, and the Jamaica trip sells for $690, 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 $710 and $640, respectively, in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.
Complete this question by entering your answers in the tabs below.
What are the current profit margins on both trips? (Round percentage answers to 1 decimal place.)
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Take-a-Break’s management believes that it must drop the price on the Cancun and Jamaica trips to $710 and $640, respectively, in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels. (Round percentage answers to 1 decimal place.)
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Requirement 1: Calculation of the current profit margins on both trips:
| Cancun | Jamaica | |
| Selling Price- | $750 | $690 |
| Less: Costs: | ||
| Oceanfront room;number of nights | $125 | $125 |
| Meals: | ||
| Breakfasts | $25 | $25 |
| Lunches | $12 | $20 |
| Dinners | $40 | $0 |
| Scuba diving trips | $76 | $76 |
| Water skiing trips | $126 | $84 |
| Airfare (round trip from Miami) | $195 | $270 |
| Transportation to and from airport | $19 | $14 |
| Total Cost- | $618 | $614 |
| Profit- | $132 | $76 |
Final Table:
| Cancun | Jamaica | |
| Price (a) | $750 | $690 |
| Profit (b) | $132 | $76 |
| Profit Margin (b/a*100) | 17.6 % | 11.0% |
Requirement 2: Calculation of new profit margins for both packages :
| Cancun | Jamaica | |
| Selling Price- (a) | $710 | $640 |
| Less: Total Cost | $618 | $614 |
| Profit (b) | $92 | $26 |
| Profit Margin (b/a*100) | 13.0% | 4.1% |
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