13 - 22. Estimate Sales Revenues Stubs-R-Us is a local event ticket broker. Last

Question

13 - 22. Estimate Sales Revenues

Stubs-R-Us is a local event ticket broker. Last year, the company sold 900,000 tickets with an average commission of $5. Because of the general economic climate, Stubs expects ticket volume to decline by 20%. In addition, employees at a local insurance company headquarters accounted for 5% of Stubs' volume. The headquarters relocated to another state and all the employees closed their accounts.

Offsetting these factors is the observation that the average commission per sale is likely to increase by 10% because the average ticket prices are expected to be larger in the coming year.

Required

Estimate commission revenues for Stubs-R-Us for the coming year.

Explanation / Answer

Estimate commission revenues for Stubs-R-Us for the coming year = $3762000

Explanation;

Following information are given in the question;

Ticket volume in next year (1 – .20) = .80

Number of sales in next year (1 – .05) = .95

An increase in average commision per sale in next year will be = 1.10

Rate of commision per sale = $5

Sale last year = 900000 tickets

Now let’s calculate, Estimate commission revenues for Stubs-R-Us for the coming year;

900000 * $5 * .80 * .95 * 1.10 = $3762000

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