The Masquerade is a casino that operates on a river. Casinos attain a profit by collecting the bets/wagers placed by guests, but giving back on average a % of revenues as winnings for the customers and incurring costs of running the operations in a casino utilizing various resources. In a typical month, the casino’s gambling area (excluding the food, beverages and lodging) had the following revenues and expenses: There were 500,000 guests. You can assume that all guests will wager the average amount always. Revenues (wagers by guests) $10,000,000 Winnings given back to Guests $3,000,000 (as a % of revenues) Labor Costs (salaries) $1,000,000 Commissions for employees $700,000 (as a % of revenues) Utilities (unrelated to the number of guests) $600,000 Utilities (related to the number of guests) $300,000 Depreciation on Casino buildings and equipment $2,000,000 Other monthly admin. and facility costs $400,000 The casino pays combined state and federal taxes equal to 25% of profit before taxes. What is the operating leverage in a typical month? What will be the operating leverage if the number of guests were to drop by 50% because of an outbreak?
The Masquerade is a casino that operates on a river. Casinos attain a profit by collecting the bets/wagers placed by guests, but giving back on average a % of revenues as winnings for the customers and incurring costs of running the operations in a casino utilizing various resources. In a typical month, the casino’s gambling area (excluding the food, beverages and lodging) had the following revenues and expenses: There were 500,000 guests. You can assume that all guests will wager the average amount always.
Revenues (wagers by guests) $10,000,000
Winnings given back to Guests $3,000,000 (as a % of revenues)
Labor Costs (salaries) $1,000,000
Commissions for employees $700,000 (as a % of revenues)
Utilities (unrelated to the number of guests) $600,000
Utilities (related to the number of guests) $300,000
Other monthly admin. and facility costs $400,000
The casino pays combined state and federal taxes equal to 25% of profit before taxes.
What is the operating leverage in a typical month? What will be the operating leverage if the number of guests were to drop by 50% because of an outbreak?
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