Question
The Science Experience (SciExperience) is a recently established not-for-profit organization in Waterloo, Ontario. SciExperience focuses on science-based entertainment and education and will be holding a
The Science Experience (SciExperience) is a recently established not-for-profit organization in Waterloo, Ontario. SciExperience focuses on science-based entertainment and education and will be holding a grand opening in two months.
The organization's mandate is to raise the profile of science and technology through an interactive and educational environment for the general public. Its initiatives include:
supporting science programs at local schools
allowing local universities to use SciExperience as a science resource centre to address declining enrolment in science programs
promoting lifelong learning in the area of science among seniors
allowing scientists to use SciExperience's equipment for a variety of research projects and share their studies in a monthly lecture series
You, CPA, are the organization's controller. You recently met with Tom Kelloway, Executive Director, to discuss the admission prices. The board requires SciExperience to operate on a break-even basis. Tom noted that SciExperience will be the recipient of a $750,000 municipal government subsidy for each of its first two years. Given this, he would like you to recommend an appropriate admission price for the first two years of operations. You should base your price on the most likely scenario, but he would also like to understand the best- and worst-case scenario break-even prices based on the estimated ranges in admissions. Market study and cost information are included in Appendix I.
Appendix I
Expected admission levels and operating cost data
Years 1 and 2
SciExperience anticipates that under the most likely scenario, the total demand will be 500,000 patrons per year (including all adults, students, senior citizens, and preschool children). Fixed costs are estimated at $3,950,000 and variable costs are estimated at $0.80 per patron.
The estimated breakdown of admissions is as follows:
Students 50%
Adults 30%
Senior citizens 10%
Preschool children 10%
The estimated breakdown of admissions and demand will not change for prices at or below $10 per person. Preschool children and seniors will be admitted for free. Students and adults will be charged the same admission price.
For the first two years, the following ranges in attendance and breakdown of admissions have been identified.
Attendance 400,000-600,000
Students 45-55%
Adults 25-35%
Senior citizens 5-15%
Preschool children 5-15%
Question: recommend an appropriate admission price for the first two years of operations. You should base your price on the most likely scenario, but he would also like to understand the best- and worst-case scenario break-even prices based on the estimated ranges in admissions. Market study and cost information are included in Appendix I.
PLEASE SHOW ALL CALCULATIONS
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