Question

An amusement park for kids faces a fixed cost of $ 300,000 per month and an average variable cost of $ 12 per visitor. It charges all visitors a flat entry fee of $29 for unlimited rides. This park’s capacity is 50,000 persons per month.

a) What is the breakeven point for this park? What percentage of the capacity refers to this breakeven point?

b) Because of the recent pandemic situation, the government lets the park authorities open the amusement park only with 30% of its capacity. Considering your answer to a, do you think that the amusement park will be able to make any profit? Explain your answer.

c)what is the level of visitors in the percentage of its capacity? where this park maximizes the profit ?

d) The park accommodates 42,000 visitors per month on average. If the variable cost per visitor raises by 28%, what entry fee per person you would propose to the company in order to cover all costs? What is the percentage change of the new breakeven point, if the variable cost increases to $ 18 per visitor?

e) Because of a radical increase in the entrance fee, the park receives 11.500 visitors in a month. If the visitor’s cost increases further by 25% on top of the last increase ($18), do you think that the park will be profitable?

Answer 1

The first 4 sub parts are explained in the images attached. We cannot answer more than 4 sub part. The second part of part d, the Q and P are not mentioned so I considered Q = 42000.