Metro Arcade sells tickets at $25 per person as a one-day entrance fee
Variable costs are $11 per person, and fixed costs are $52,500 per month.
Assume that Metro increases variable costs from $11 to $14 per person. Compute the new breakeven point in tickets and in sales dollars.
What will be an ideal response
Unit contribution margin = Net sales revenue per unit - Variable costs per unit
= $25 = $14 = $11
Required sales in units = (Fixed costs + Target profit) / Contribution margin per unit
= ($52,500 + $0 ) / $11
= 4,773 tickets
Required sales dollars = Selling price per ticket x Required ticket sales
= $25 x 4,773 = $119,325
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