Question

Funtime Park competes with Slide World by providing a variety of rides. Funtime sells tickets at $ 85 per person as a​ one-day entrance fee. Variable costs are $ 17 per​ person, and fixed costs are $ 428,400 per month. Compute Funtime ​Park's contribution margin ratio. Carry your computation to two decimal places. Use the contribution margin ratio approach to determine the sales revenue Funtime Park needs to break even.

Perform a numerical proof to compute the contribution margin per unit.

Answer 1

$531,000

Step-by-step explanation:

For determining the contribution margin ratio, first we have the contribution margin per unit which is shown below:

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $85 - $17

= $68

And, Contribution margin ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100

So, the Contribution margin ratio is

= ($68) ÷ (85) × 100

= 80%

Now the break even point in sales dollars is

= $428,400 ÷ 80%

= $531,000

We simply applied the formulas