You, as the manager of the Collingwood Travel Agency, are keen to make sure that you calculate the
costs of each service carefully. You recognise that once these have been calculated accurately, you will
be able to set an appropriate price.
You are also aware of the importance of profit, especially the distinction between gross profit and net
profit.
You earn quite a reasonable salary as the manager of the travel agency, but you have to pay income tax
on some of your earnings. You understand that income tax is often a progressive tax, but that other
taxes are described as regressive.
It is important that all companies produce an accurate profit and loss account. It is also important that
companies understand that if they borrow money, they will usually need to pay interest on the money
borrowed.
The three hour coach journey provided by the travel agency had the following costs:
Item Cost
Driver’s wages $32
Diesel $60
Hire of coach $200
Insurance $8
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