Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 21

Basic Decision Analysis Using CVP

Anu’s Amusement Center has collected the following data for operations for the year:

Total revenues	?$800,000
Total fixed costs	$218,750
Total variable costs	$450,000
Total tickets sold	50,000

Required

a. What is the average selling price for a ticket?

---

b. What is the average variable cost per ticket?

---

c. What is the average contribution margin per ticket?

---

d. What is the break-even point?

---

e. Anu has decided that unless the operation can earn at least $43,750 in operating profits, she will close it down. What number of tickets must be sold for Anu’s Amusements to make a $43,750 operating profit for the year on ticket sales?

Step 1 of 9

Sales revenue

Sales revenue is the revenue earned by the company by selling its goods or providing its services. The sales revenue is calculated as number of units sold multiplied by the sale price per unit.

Variable costs

Variable costs are the costs which varies with the output of quantity produced that is if the number of units produced increases then the variable cost would also increase.

Fixed costs

Fixed costs are cost which does not varies with the number of units produced and would remain fixed to the extent of producing capacity of the company and any goods produced in excess of capacity would lead to increase in fixed costs. If units are produced below the production capacity of the company still the costs incurred would remain fix and would not change.