Question

Storytime Park competes with Splash World by providing a variety of rides. Storytime sells tickets at $ 100 per person as a​ one-day entrance fee. Variable costs are $ 60 per​ person, and fixed costs are $ 254 comma 000 per month. Compute Storytime ​Park's contribution margin ratio. Carry your computation to two decimal places. Use the contribution margin ratio approach to determine the sales revenue Storytime Park needs to break even.

Answer 1

Answer:

contribution margin ratio= 0.4

Break-even point (dollars)= $635,000

Explanation:

Giving the following information:

Storytime sells tickets at $ 100 per person as a​ one-day entrance fee.

Variable costs are $ 60 per​ person, and fixed costs are $254,000 per month.

To calculate the contribution margin ratio, we need to use the following formula:

contribution margin ratio= contribution margin/selling price

contribution margin ratio= (100 - 60)/100

contribution margin ratio= 0.4

To calculate the sales required to break even, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 254,000/0.4

Break-even point (dollars)= $635,000