Question

Anu’s Amusement Center has collected the following data for operations for the year: Total revenues $ 2,400,000 Total fixed costs $ 656,250 Total variable costs $ 1,350,000 Total tickets sold 75,000 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?
d. What is the break-even point?
e. Anu has decided that unless the operation can earn at least $131,250 in operating profits, she will close it down.

What number of tickets must be sold for Anu’s Amusements to make a $131,250 operating profit for the year on ticket sales?

Answer 1

a)$32

b)$18

c)$14

d) 46,875 units

e) 56,250

Step-by-step explanation:

a) calculate the average selling price for a ticket sold

the formula = Total tickets sold / The total number of tickets sold

= 2,400,000/ 75,000= $32

b) Calculate average variable cost per ticket sold

the formula = The total variable cost / the total number of tickets sold

= 1,350,000/75,000= $18

c) Calculate the average contribution margin per ticket sold

the formula= The selling price of tickets - the variable cost of the tickets

= $32-$18 = $14

d) Estimate the break-even point

The formula = the total fixed costs/ the derived contribution per unit

=656,250/14 = 46,875 units

e) Calculate the number of tickets to be sold to earn $131,250 profit

This is an estimation of target units based on target profit

Target Unit= (fixed costs + expected or target profit) / the Contribution per unit

=(656,250 + $131,250) / $14

=56,250 units need to be sold to arrive at the target profit