(1)Joe is a contractor who operates a train station for the City of Austin. The City of Austin pays Joe a commission of 20 % based on total ticket sales revenue. The City of Austin charges the customer $1,800 per ticket. The commission is the only revenue source that Joe received from the City of Austin. Joe's fixed costs are $14,000 per month and his variable costs are $20 per train ticket.

Analysis 1:

(a) How many train tickets must Joe sell to break-even?

(b) If Joe wants to make a profit of $ 7,000, how many tickets must Joe sell?

Analysis 2:

(2) The City of Austin has decided that it will now pay Joe a 20% commission per train ticket up to a maximum of $50 regardless of the price of the ticket. Any train ticket costing more than $1000 will generate only a $50 commission. Joe is wondering how this new arrangement Will affects his breakeven point and his profit.

(a) How will analysis 2 affect your answers in analysis 1 above?