Funday Park competes wth Cool World by providing a variety of fides. Funday Park

Question

Funday Park competes wth Cool World by providing a variety of fides. Funday Park sells tickets at $0 per person as a one-day entrance fee Varkiable costs ane $42 per person, and fand ots are $170,800 per month. The breakeven number of Sckets is 6,100 Funday Park expects to sell 8,100 tickets, compute the margin of safety in Sickets and in sales dolas Begin by selecting the formula labels and then entering the amounts to compule the margin of safety in units Margin of safety in units Mangin of safety in dolians

Explanation / Answer

Selling price per ticket     $70 per person Variable cost per person   $ 42 per person Total Fixed cost   $ 170,800 Contribution per person (Selling price - variable cost ) =( 70-42) = $ 28 per unit Break even sales   6,100 tickets Actual Slaes units 8,100 tickets Formula for Margin of Safety in units Actual sales Units   - Break even sales Units = Margin of Safety in units 8,100 - 6,100 = 2,000 units Formula for Margin of Safety in $ Margin of Safety units * Selling price per ticket = Margin of Safety in $ 2,000 tickets * $ 70 per ticket   = $140,000 Revised Fixed Cost :   $231,000 Formula for Revised Break even in Units: (Fixed cost + Target Profit) / Contribution per unit = Break even sales in units (231,000 + 0 ) / $ 28 per ticket 8,250 tickets Formula for Revised Break even in $: (Fixed cost + Target Profit) / CM Ratio % = Break even sales in $ (231,000 + 0 ) / 40% = $577,500 Note: Here Target profit is Nil, as at break even point, there is no profit no loss.

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