Reference no: EM133064200

Question - Green Lodge is a company operated by Adam as a summer vacation getaway in the great Arizona valley. It operates camping lodges offering accommodation and adventure trips for individuals and groups. Over the last few years, the average number of tourists trips was 50. The average charge per person for the cruise, including group discounts was $100.The company operates from mid-may until mid-August. On average the lodge takes 90 (adventure trips) during this period.

The lodge requires a staff of 6 and is managed by the owner of the company. University students with extensive tourism experience have been willing to work on a daily basis of $120. They are paid only if there are any adventure trips. The lodge also provides non-alcoholic refreshments and a light lunch. These are required daily from a local cafeteria and cost on average $20 per person. The daily operating expenses, fuel and miscellaneous supplies average $60 per trip. The company has a variety of annual expenses (fixed costs) including: maintenance, depreciation, marketing, licenses, Etc... Totaling approximately $73,440.

- Compute the revenue, variable expenses and the contribution margin for each trip.

- Compute the number of trips Green Lodge must have each year to breakeven.

- The Adam, the owner, expects a profit of $130,000 (being total return on his capital and remuneration for being the manager). Using the concept of "contribution margin" and a cost-volume-profit notion, estimate how many trips the Lodge needs to make to reach this objective? Is there a realistic expectation?

- Prepare a contribution margin income statement for Green Lodge assuming 100 adventure trips are being done during this period.