i only want the answer of part c 2-19. An amusement park faces large fixed costs
ID: 1162818 • Letter: I
Question
i only want the answer of part c
2-19. An amusement park faces large fixed costs of 500,000 per month and low average variable costs of $10 per visitor. It charges all visitors a flat entry fee of $50 for unlimited rides a. What is the breakeven point for this park? b. The park currently has 42,000 visitors a month and proposes to raise its entry fee to $60 per person in order to cover the cost of a new Harry Potter-themed ride. What is the new breakeven point if the variable cost increases to $15 per visitor? c. If the park now receives 25,000 visitors a month because of the increase in entrance fee in Part (b), will the park still be profitable? (2.2)Explanation / Answer
Fixed cost: 500,000 Revenue fees: $ 50 per visitor Variable cost: $10 per visitor Contribution per visitor: 50-10 = $ 40 per visitor Req a: Break even point: Fixed cost / Contribution per visitor 500000 /40 = 12500 visitors Req b: Revised fees: 60 Variable cost: 15 Contribution= 60-15 = 45 Fixed cost: 500000 Break even in terms of visitors: fixed cost / Revised CM per visitor 500000 / 45 = 11,111 per visitors Reqc: Yes it is still profitable as the break even comes at 11,111 visitors. After break even point, the company will earn the profits upto 25000 visitors
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