Question

Stubs-R-Us is a local event ticket broker. Last year, the company sold 750,000 tickets with an average commission of $10. Because of the general economic climate, Stubs expects ticket volume to decline by 20 percent. In addition, employees at a local insurance company headquarters accounted for 8 percent of Stubs’ volume. The headquarters relocated to another state and all the employees closed their accounts.
Offsetting these factors is the observation that the average commission per sale is likely to increase by 13 percent because the average ticket prices are expected to be larger in the coming year.
Required:
Estimate commission revenues for Stubs-R-Us for the coming year.

Answer 1

Answer:

$6,237,600

Explanation:

The computation of Estimate commission revenues is shown below:-

In the Coming year the market volume = 100% - 20%

= 80%

In the Coming year the number of sales = 100% - 8%

= 92%

In the coming year the Average commission per trade = 100% + 13%

= 113%

Commission revenue = Sold tickets × Average commission × In the Coming year the market volume × In the Coming year the number of sales × In the coming year the Average commission per trade

= 750,000 × $10 × 0.80 × 0.92 × 1.13

= $6,237,600

We applied the same formula to find out the commission revenue earned by the company