Question

David Booth operates Booth Bootcamp Pty Ltd. David is a graduate of a sports and a recreation course, offers customised adventures for business groups wanting to develop their staff. Two clients have approached Booth Bootcamp Pty Ltd to run an adventure in the first week of April but David can run only one adventure at a time and has to choose which alternative will maximise profit. Both adventures will require a week of David’s time at a cost of $1100 and the use of the company’s specially fitted-out SUV at a cost of $2800. One client wants a rock climbing adventure for 10 people and will pay up to $860 per person. The cost per person for food and equipment is $180 and fixed setup costs are $2500. The other client wants a white water rafting adventure for 8 people and will pay up to $900 per person. David estimates the cost per person for food and equipment is $170 and the fixed setup costs are $2500.

Required

(a) Using only the differential income and expenses determine which adventure David

should provide. (LO2)

Answer 1

		Differential Income and expenses
			X	Y	Z=Y-X
			White water	Rock
			Rafting	Climbing	Difference
	A	Charges per person	$900	$860
	B	Number of persons	8	10
	C=A*B	Income	$7,200	$8,600	$1,400
		Fixed costs:
	D	Divid's time	$1,100	$1,100
	E	SUV use	$2,800	$2,800
	F	Fixed setup copst	$2,500	$2,500
	G=D+E+F		$6,400	$6,400	$0
	H	Cost per person (food and equipment)	$170	$180
	I=B*H	Total cost of food and equipment	$1,360	$1,800	$440
		Differential Profit			$960
		Differential Income	$1,400
		Differential expenses	$440
		Differential Profot	$960
		David should profide Rock Climbing
		This alternative has differential profit of$960