Question
1.Break-even analysis. The manager of a municipal ice rink is concerned that the flow of patrons will not be sufficient to maintain the long-standing policy
1.Break-even analysis. The manager of a municipal ice rink is concerned that the flow of patrons will not be sufficient to maintain the long-standing policy of keeping the rink on a self supporting basis. Revenues come mainly from the hourly rental of ice time (the city has set that at $5 per hour per person) and skate rental ($4 per pair). The average ice time per patron over the last three years has been about 1.5 hours. Approximately half the patrons rent skates (and others bring their own skates). Salaries, scheduled maintenance, and other overhead expenditures amount to $190,500 per year; these costs do not vary with the number of patrons (i.e., direct maintenance and supplies) are estimated to be about $3 per patron hour. answer the following questions:
1)and prepare a break-even chart for the ice rink. What is the break-even patron level?
2)The number of patrons has been averaging 35,000 per year for the last three years. Is the manager right to be concerned?
3)Suppose the ice rink wanted to encourage senior participation by charging a rate that would cover only the costs directly caused by their attendance. What price would you charge?
4)Prepare a budget for the ice rink if you expect a 10% increase in attendance next year. How much are the total expenditure and revenue? Will the ice rink have a surplus or deficit?
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