Preliminary plans are underway for construction of a new stadium for a major league baseball team. City officials question the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may purchase a box for $250,000. The fixed construction cost for the upper-deck area is estimated to be $5,400,000, with a variable cost of $100,000 for each box constructed. What is the breakeven point for the number of luxury boxes in the new stadium? Preliminary drawings for the stadium show that space is available for the construction of up to 60 luxury boxes. Promoters indicate that buyers are available and that all 60 could be sold if constructed. What is your recommendation concerning the construction of luxury boxes? What profit is anticipated? How will the break-even point change if the fixed cost increases by 15%, variable cost by10% and selling price increases by 12.5%? ANSWER USING EXCEL

Break-even point means total revenues equals to total expenses. At Break-even point, where there is…

Answered: Preliminary plans are underway for…

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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Preliminary plans are underway for construction of a new stadium for a major league baseball team. City officials question the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may purchase a box for $250,000. The fixed construction cost for the upper-deck area is estimated to be $5,400,000, with a variable cost of $100,000 for each box constructed.

What is the breakeven point for the number of luxury boxes in the new stadium?

Preliminary drawings for the stadium show that space is available for the construction of up to 60 luxury boxes. Promoters indicate that buyers are available and that all 60 could be sold if constructed. What is your recommendation concerning the construction of luxury boxes? What profit is anticipated?

How will the break-even point change if the fixed cost increases by 15%, variable cost by

10% and selling price increases by 12.5%?

ANSWER USING EXCEL

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