Question

Anu’s Amusement Center has collected the following data for operations for the year. Total revenues $ 1,980,000 Total fixed costs $ 652,400 Total variable costs $ 1,056,000 Total tickets sold 66,000 Required: a. What is the average selling price for a ticket? b. What is the average variable cost per ticket? c. What is the average contribution margin per ticket? (Do not round intermediate calculations.) d. What is the break-even point? (Do not round intermediate calculations.) e. Anu has decided that unless the operation can earn at least $306,600 in operating profits, she will close it down. What number of tickets must be sold for Anu’s Amusements to make a $306,600 operating profit for the year on ticket sales? (Do not round intermediate calculations.)

Answer 1

Answer:

a. Average selling price per unit = $30

b. Average variable cost = $16

c. Average Contribution margin per ticket = $14

d. Break Even Point = 46,600 Tickets

e. For profit of $306,600 = 68,500 tickets

Explanation:

As for the provided information we have,

a. Average selling price per unit = $\frac{Total\ Sales\ Revenue}{Number\ of\ Units}$

Provided total sales revenue = $1,980,000

Number of units = $66,000

Thus, average selling price = $\frac{1,980,000}{66,000} = 30$ = $30 per unit.

b. Average variable cost = $\frac{Total\ variable\ cost}{Number\ of\ units}$

Provided total variable cost = $1,056,000

Number of units = $66,000

Thus, average variable cost per unit = $\frac{1,056,000}{66,000} = 16$ = $16 per unit

c. Average Contribution margin per ticket = Average selling price per ticket - Average variable cost per ticket = $30 - $16 = $14 per unit.

Alternatively it can be calculated as $\frac{Total\ sales - Total\ variable\ cost}{Number\ of\ units}$ = $\frac{1,980,000 - 1,056,000}{66,000} = 14$

d. Break Even Point = $\frac{Fixed\ Cost}{Contribution\ per\ unit}$

Fixed cost = $652,400

Contribution per unit = $14 per unit

Break even point = $\frac{652,400}{14} = 46,600$ = 46,600 Tickets

e. In this case desired profit = $306,600

Fixed cost = $652,400

Total amount to be recovered through contribution = $306,600 + $652,400 = $959,000

Thus, number of tickets to be sold = $\frac{959,000}{14} = 68,500$

That is 68,500 tickets.