Muskoka Travel offers guided tours through the lake system. Muskoka Travel provides a guide, necessary equipment, and food for a fee of $75 per person per day. Currently the company is providing an average of 600 guide-days per month. Based on available equipment and guides the maximum capacity is 950 guide-days (customers taken on the equivalent of an all day tour) per month.
Variable costs per guide-day for the year were as follows:

Required:
A group of foreign tourists has offered Muskoka Travel a proposal of 300 guide-days in July if they will cut the fee to $67.50 per guide-day. They have their own food and do not want to use the Muskoka Travel menus. Muskoka Travel will incur $300 in additional costs for busing the tourists back and forth to the camp site. If fixed costs would not increase, should Muskoka Travel accept the special offer?

Question

Muskoka Travel offers guided tours through the lake system. Muskoka Travel provides a guide, necessary equipment, and food for a fee of $75 per person per day. Currently the company is providing an average of 600 guide-days per month. Based on available equipment and guides the maximum capacity is 950 guide-days (customers taken on the equivalent of an all day tour) per month.
Variable costs per guide-day for the year were as follows:
   
Required:
A group of foreign tourists has offered Muskoka Travel a proposal of 300 guide-days in July if they will cut the fee to $67.50 per guide-day. They have their own food and do not want to use the Muskoka Travel menus. Muskoka Travel will incur $300 in additional costs for busing the tourists back and forth to the camp site. If fixed costs would not increase, should Muskoka Travel accept the special offer?

Quizplus · Accepted Answer

The Answer is <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB9771/11eeaed5_56f6_6767_8967_b5c6ff8c6f52_TB9771_00.jpg" alt=" " class="answers-bank-image d-block" rel="preload" >

Muskoka Travel Offers Guided Tours Through the Lake System