Storytime Park competes with DaisyWorld by providing a variety of rides. Storyti

Question

Storytime Park competes with DaisyWorld by providing a variety of rides. Storytime sells tickets at $70 per person as a one-day entrance fee. Variable costs are $15 per person, and fixed costs are $371,250 per month.

Requirements
R1. Suppose Storytime Park cuts its ticket price from $70 to $60 to increase the number of tickets sold. Compute the new breakeven point in tickets and in sales dollars. Carry your computations to five decimal places.
R2. Ignore the information in requirement 1. Instead, assume that Storytime Park reduces the variable cost from $15 to $10 per ticket. Compute the new breakeven point in tickets and in dollars. Carry your computations to five decimal places.

Explanation / Answer

Answer: R1

New BEP=Fixed cost/Contribution margin per unit

=$371250/($60-$15)

=8250 tickets

BEP ($)=8250*$60=$495000

Answer:R2

New BEP=Fixed cost/Contribution margin per unit

=$371250/($70-$10)

=6187.50 tickets

BEP ($)=6187.50*$70=$433125

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