An amusement park faces large fixed costs of $500,000 per month and low average variable costs of $10 per visitor. It

Question

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. 9/26/2020 11:08:39 AM-221621K-94.59.128.185 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?

Help In Homework · Accepted Answer

Break-even point is the point where a company's revenues equals its costs. To calculate breakeven point per unit , the formula is Break -even point in sales (units) = Fixed costs / contribution margin per unit Contribution Margin = selling price per unit - variable cost per unit The given values are Fixed cost = $500000 , Variable cost = $10 per visitor , Entry fees(sales) = $50 a. Break-even point for this park = $ 500000/ ($50 - $ 10) = 5,00,000 / 40 = $12,500 Break - even point for this park = $12,500 The given values are Entry fees = $60 , Variable cost = $15 per visitor , fixed cost = $500000 b. The new Break - even point for this park = $5,00,000 / ( $60 -$ 15) =5,00,000 / 45 = $ 11,111 New Break-even point = $ 11,111 c. Yes still the park be profitable as it has raised its entry fee to $60 and also the break even point of the park will be less than the previous part's Break-even point.

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An amusement park faces large fixed costs of $500,000 per month and low average variable costs of $10 per visitor

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