Storytime Park competes with DaisyWorld by providing a variety of rides. Storytime sells tickets...

Question:

Storytime Park competes with DaisyWorld by providing a variety of rides. Storytime sells tickets at $70 per person as a one-day entrance fee. Variable costs are $15 per person, and fixed costs are $371,250 per month.

Compute the number of tickets Storytime must sell to break even. Perform a numerical proof to show that your answer is correct.

Break-Even Analysis:

Break-even is a term applied when analyzing the profitability of a firm. It is used to refer to the state in which revenues are equal to costs. The profit of a firm is calculated as Proofit = Revenues - Costs therefore, at the break-even point a firm will make zero profits. We calculate the break-even point as it indicates the lowest level of sales that a firm can have before it starts incurring losses.

Answer and Explanation: 1

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Selling price = $70 per person

Variable costs = $15 per person

Fixed costs = $371,250 per month


{eq}\begin{align*} \ BEP_{tickets} &=...

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Break-Even Analysis: Definition & Example

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Chapter 4 / Lesson 3
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A break-even analysis utilizes a price calculation formula to determine how much product a business must sell and at what price in order to make a profit. Learn how to apply this analysis through examples with fixed and variable costs, and discover the importance of a margin of safety.


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