Delaware Carnival Inc. will be offering a new ride in its amusement park. It has identified the following sales and costs from its introduction phase to the growth stages. Year 0 Year 1 Year 2 ТОTAL Tickets to be sold 72,000 240,000 312,000 Price per unit P 200 200 200 COSTS Research and Development Ride designing and prototyping P 8,000,000 P 8,000,000 24,000,000 24,000,000 Ride equipment manufacturing and safety trial runs 10,000,000 10,000,000 Marketing 8,000,000 P 8,000,000 P 4,000,000 20,000,000
Delaware Carnival Inc. will be offering a new ride in its amusement park. It has identified the following sales and costs from its introduction phase to the growth stages. Year 0 Year 1 Year 2 ТОTAL Tickets to be sold 72,000 240,000 312,000 Price per unit P 200 200 200 COSTS Research and Development Ride designing and prototyping P 8,000,000 P 8,000,000 24,000,000 24,000,000 Ride equipment manufacturing and safety trial runs 10,000,000 10,000,000 Marketing 8,000,000 P 8,000,000 P 4,000,000 20,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Delaware Carnival Inc. will be offering a new ride in its amusement park. It has identified the
following sales and costs from its introduction phase to the growth stages.
Year 0
Year 1
Year 2
ТОTAL
Tickets to be sold
Price per unit
72,000
240,000
312,000
200
P
200
200
COSTS
Research and Development
P 8,000,000
P 8,000,000
Ride designing and prototyping
Ride equipment manufacturing
24,000,000
24,000,000
10,000,000
10,000,000
and safety trial runs
P 4,000,000
2,000,000
1,200,000
4,800,000
1,200,000
500,000
Marketing
Repairs and maintenance
8,000,000
4,000,000
P 8,000,000
3,000,000
360,000
20,000,000
9,000,000
1,560,000
Utilities
Customer Support
1,440,000
360,000
500,000
P 54,500,000 P 13,660,000 P 13,700,000 P81,860,000
6,240,000
Cost of printing tickets
1,560,000
1,500,000
Incremental Administrative
500,000
TOTAL COSTS
Its maturity stage will span a period of three years where the entity will be forced to lower its
prices to P180 per ticket to maintain annual sales of 300,000. Its decline stage will provide sales of
P18,000,000 (100,000 tickets x P180) and total costs of P15,000,000.
If the target life cycle profit margin is 25%, how much is the total maximum cost that Delaware can
incur over the three-year maturity phase?
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