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Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
Edition 6ISBN: 978-0078025532Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
Edition 6ISBN: 978-0078025532 Exercise 2
Target Costing in a Service Firm 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:
The Cancun trip sells for $750, and the Jamaica trip sells for $690.
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 trip to $710 and on the Jamaica trip to $650 in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.
3. Describe two ways that Take-a-Break Travel could cut its costs to get the profit margins back to their original levels.
The Cancun trip sells for $750, and the Jamaica trip sells for $690.
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 trip to $710 and on the Jamaica trip to $650 in order to remain competitive in the market. Recalculate profit margins for both packages at these price levels.
3. Describe two ways that Take-a-Break Travel could cut its costs to get the profit margins back to their original levels.
Explanation
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Target Cost:
Target costing is one of t...
Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
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