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 past experience it is expected to be as follows: Number of Visitors Probability 800 visitors 50% 900 visitors 30% 1,000 visitors 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 Probability $8 per visitor 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.
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 past experience it is expected to be as follows:
|
Number of Visitors |
Probability |
|
800 visitors |
50% |
|
900 visitors |
30% |
|
1,000 visitors |
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 |
Probability |
|
$8 per visitor |
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.
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