Question

Hickory point amusement park sells admission tickets for $50 per person for one visit. variable costs are $15 per visitor and fixed costs are $60,000,000 per month. the company's relevant range extends to 2,000,000 visitors per month. what is hickory point's projected operating income if 1,750,000 visitors come to the park during the month?

Answer 1

First, calculate for the total operating cost of the park through the equation,

   TC = TV + TF

where TC is the total cost,
     TV is the total variable cost which is equal to the product of the variable cost per visitor and number of visitor, and
     TF is the total fixed cost. 

Substituting the known values,
    TC = ($15)(1,750,000) + $60,000,000 = $86,250,000

Then, the total revenue is the product of the cost of ticket and the number of visitors.
     TR = ($50/visitor)(1,750,000 visitors) = $87,500,000

Subtracting the two values will give us an answer of $1,250,000.

ANSWER: $1,250,000