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Question (Category: Business Accounting )
Blueline Tours, Inc. - Analysis of Discontinuing Tour Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve the companyrsquos overall operating performance. One such tour is a two-day Historic Mansions bus tour conducted in the southern states. An income statement from a typical Historic Mansions tour is given below Ticket revenue (105 seat capacity times 40% occupancy times $60 ticket price per person) $ 2,520 100 % Variable expenses ($14.00 per person) 588 23.3 Contribution margin 1,932 76.7 % Tour expenses Tour promotion $ 700 Salary of bus driver 320 Fee, tour guide 720 Fuel for bus 200 Depreciation of bus 500 Liability insurance, bus 180 Overnight parking fee, bus 50 Room and meals, bus driver and tour guide 190 Bus maintenance and preparation 240 Total tour expenses 3,100 Net operating loss $ (1,168) The following additional information is available about the tour a. Bus drivers are paid fixed annual salaries tour guides are paid for each tour conducted. b. The ldquoBus maintenance and preparationrdquo cost on the previous page is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the companyrsquos fleet of buses in good operating condition. c. Depreciation of buses is due to obsolescence. Depreciation due to wear and tear is negligible. d. Liability insurance premiums are based on the number of buses in the companyrsquos fleet. e. Dropping the Historic Mansions bus tour would not allow Blueline Tours to reduce the number of buses in its fleet, the number of bus drivers on the payroll, or the size of the maintenance and preparation staff. Required By how much will the profits increase or decrease if this tour is discontinued? (Input the amount as a positive value. Omit the quot$quot sign in your response.)


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