Question

The Atlanta Zoo must decide whether to move twin polar bears to Sea World or build a special exhibit for them and the zoo. The expected increase in attendance is 200,000 patrons. The data are:

Revenues per Patron for Exhibit             Gate receipts                $4             Concessions                $5             Licensed apparel         $15 Estimated Fixed Costs             Exhibit construction    $2,400,000             Salaries                        $220,000             Food                            $30,000 Estimated Variable Costs per Person             Concessions                $2             Licensed apparel         $9

      

     

Is the predicted increase in attendance sufficient to break even?

Answer 1

Profit = Total Revenue - Total Costs

Profit = (4+5+15)*200000-2400000-220000-30000-200000*(2+9) = -$50000

There is a loss of $50000.

Predicted increase is not sufficient to break even