Question

Take-a-Break Travel Company offers spring break travel packages to college students. Two of its packages, a seven-day, six-night trip to Cancun and a five-day, four-night trip to Jamaica, have the following characteristics:

Package Specifications	Cancun				Jamaica				Cost Data
Oceanfront room; number of nights		6				4			$	30	/night
Meals:
Breakfasts		7				5			$	5	/ea
Lunches		7				5			$	7	/ea
Dinners		6				0			$	10	/ea
Scuba diving trips		4				2			$	15	/ea
Water skiing trips		5				2			$	10	/ea
Airfare (round trip from Miami)		1				1			$	175	(Cancun),
									$	250	(Jamaica)
Transportation to and from airport		1				1			$	15	(Cancun),
									$	10	(Jamaica)

The Cancun trip sells for $750, and the Jamaica trip sells for $690. (Round percentage answers to 1 decimal place. (i.e., .123 = 12.3%).)

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 $650, respectively, in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.

Answer 1

The cost which Take-a-Break Travel Company incurs for Cancun & Jamaica Trips is as under -

Particular	Cancun	Jamaica
Room	6 x 30 = 180	4 x 30 = 120
Breakfast	7 x 5 = 35	5 x 5 = 25
Lunch	7 x 7 = 49	5 x 7 = 35
Dinner	6 x 10 = 60	No Dinner
Scuba	4 x 15 = 60	2 x 15 = 30
Water Skiing	5 x 10 = 50	2 x 10 = 20
Airfare	175	250
Transfers	15	10
Total	624	490

Answer 1) - Current Profit margin for Cancun is 126 $ i.e. 16.8%

Current Profit margin for Jamaica is 200 $ i.e. 29%

Answer 2) - Profit margins at revised rate i.e. $710 & $ 650 for Cancun & Jamaica respectively are as under

Revised Profit margin for Cancun is $ 86 i.e. 12.1%

Revised Profit margin for Jamaica is $ 160 i.e. 24.6%