Question

Playtime Park competes with Zip World by providing a variety of rides. Playtime Park sells tickets at $ 60 per person as a​ one-day entrance fee. Variable costs are $ 24 per​ person, and fixed costs are $ 226 comma 800 per month. The breakeven number of tickets is 6 comma 300. If Playtime Park expects to sell 7 comma 550 ​tickets, compute the degree of operating leverage​ (round to two decimal​ places). Estimate the operating income if sales increase by 10​%. Begin by selecting the formula labels and then entering the amounts to compute the degree of operating leverage for Playtime Park. ​(Round the degree of operating leverage to two decimal​ places, X.XX.) / = Degree of operating leverage / = Estimate the new operating income if total sales increase by 10​%. ​(Round your final answer to the nearest​ dollar.) The estimated operating income will be $ .

Answer 1

Answer:

degree of operating leverage 6.04

Income if sales increase by 10%: 72,180

Explanation:

degree of operating leverage:

$\frac{contribution}{profit}$

contribution per ticket

60 sales price - 24 variable cost = 36 dollars

36 x 7,550 = 271,800 total contribution

fixed cost   (226,800)

profit             45,000

$\frac{271,800}{45,000}$

degree of operating leverage: 6.04

the sales have a multiplier effect of 6.04

a 10 percent increase on sales translates to 60.4 percent in the net operating income:

income with a 10% sales:

45,000 x ( 1  + 60.4%) = 72.180