John is thinking about getting into tourism business on Oahu. He will take to th

Question

John is thinking about getting into tourism business on Oahu. He will take to the main tourist spots on the island in a new van he is planning to buy. He would like tourists he has to move daily to have a before-taxes profit of $1000 per month so he He will work 25 days per month. His costs for the new business would be as follows: Variable costs per day trip Gasoline: $30 Maintenances: $5 (oil, tune-ups, wheels, repairs, etc.) Fixed costs Leasing and insurance: $1000 per month Personal expenses: $1000 (the minimum amount he needs for living) He is planning to charge $45 per visitor for a day trip. Using the break-even formula, John will need how many daily travelers in order to per month?

Explanation / Answer

let total number of visitors = x

1000+1000 + 1000 + 25*(30+x) = 45*x

3000 + 750 + 25x = 45 x

3750 = 20x

x = 375/2

solving we get

x = 375/2

minimum number of passenger = 187.5 = 188

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