Wembley Travel Agency specializes in flights between Los Angeles and London. It books passengers on United Airlines at $900 per round-trip ticket. Until last month, United paid Wembley a commission of 10% of the ticket price paid by each passenger. This commission was Wembley’s only source of revenue. Wembley’s fixed costs are $14,000 per month (for salaries, rent, and so on), and its variable costs are $20 per ticket purchased for a passenger. This $20 includes a $15 per ticket delivery fee paid to Federal Express. (To keep the analysis simple, we assume each round-trip ticket purchased is delivered in a separate package. Thus, the $15 delivery fee applies to each ticket.)
United Airlines has just announced a revised payment schedule for all travel agents. It will now pay travel agents a 10% commission per ticket up to a maximum of $50. Any ticket costing more than $500 generates only a $50 commission, regardless of the ticket price. After United Airlines' revised payment schedule, what is the maximum commission that Wembley Travel Agency can receive for a round-trip ticket costing $600? Question 4Answer a. $50 b. $60 c. $55 d. $65
To determine the maximum commission that Wembley Travel Agency can receive for a round-trip ticket costing $600 under United Airlines' revised payment schedule, we need to apply the new commission structure.
According to the new payment schedule:
For a round-trip ticket costing $600:
Therefore, the maximum commission that Wembley Travel Agency can receive for a round-trip ticket costing $600 is:
a. $50