B) The manager of a tourist attraction is considering whether to open on 1 January, a day when the attraction has, in previous years, been closed. The attraction has a daily capacity of 1,000 visitors. If the attraction opens for business on that day it will incur additional specific fixed costs of $30,000. The contribution from the sale of tickets would be $25 per visitor. The number of visitors is uncertain but based on experience it is expected to be as follows: Probability Number of Visitors 800 visitors 900 visitors 1,000 visitors 50% 30% 20% It is expected that visitors will also purchase souvenirs and refreshments. The contribution which would be made from these sales has been estimated as follows: Spending per Visitors $8 per visitor Probability 35% $10 per visitor 40% $12 per visitor 25% Required: Calculate whether it is worthwhile opening the tourist attraction on 1 January. You should use expected value as the basis of your analysis.

B) The manager of a tourist attraction is considering whether to open on 1 January, a day when the attraction has, in previous years, been closed. The attraction has a daily capacity of 1,000 visitors. If the attraction opens for business on that day it will incur additional specific fixed costs of $30,000. The contribution from the sale of tickets would be $25 per visitor. The number of visitors is uncertain but based on experience it is expected to be as follows: Probability Number of Visitors 800 visitors 900 visitors 1,000 visitors 50% 30% 20% It is expected that visitors will also purchase souvenirs and refreshments. The contribution which would be made from these sales has been estimated as follows: Spending per Visitors $8 per visitor Probability 35% $10 per visitor 40% $12 per visitor 25% Required: Calculate whether it is worthwhile opening the tourist attraction on 1 January. You should use expected value as the basis of your analysis.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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