Sensitivity Exercise: Your customer operates a hotel with a small water park in Fargo. The water park is operated in a separate entity than the hotel, with revenues from hotel guests and outside users, and the owners reported the results below for the water park in 2023. A new competing water park will open in 2024, so the management would like to assess the impact of a 25% decline in customer visits at the 2023 average spend rate per visit. Alternatively, they feel they may be able to keep the same number of clients by dropping their average price by 35%. Calculate the impact of each of these changes individually, as well as the potential gross revenue figure if both of these events should occur at the same time. # of customer visits (per year) Average customer spend per visit Gross Revenues 2023 Results 13,650 $20 $273,000 25% Drop in Visits $20 35% Drop in Prices 13,650 Combined Impact

Sensitivity Exercise: Your customer operates a hotel with a small water park in Fargo. The water park is operated in a separate entity than the hotel, with revenues from hotel guests and outside users, and the owners reported the results below for the water park in 2023. A new competing water park will open in 2024, so the management would like to assess the impact of a 25% decline in customer visits at the 2023 average spend rate per visit. Alternatively, they feel they may be able to keep the same number of clients by dropping their average price by 35%. Calculate the impact of each of these changes individually, as well as the potential gross revenue figure if both of these events should occur at the same time. # of customer visits (per year) Average customer spend per visit Gross Revenues 2023 Results 13,650 $20 $273,000 25% Drop in Visits $20 35% Drop in Prices 13,650 Combined Impact

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter13: Emerging Topics In Managerial Accounting

Section: Chapter Questions

Problem 36E: Crazy Fan Guard Company provides security services to popular live sporting event venues. Crazy Fan...

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