Sufficient to maintain the long-standing policy

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Reference no: EM131445322

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 $2.50 per hour per person) and skate rental ($1.50 per pair). The average ice time per patron over the last three years has been about 1.5 hours. Approximately half of the patrons rent skates. Salaries, scheduled maintenance, and the overhead expenditures amount to $94,500 per year; these costs do not vary with the number of patrons. Costs that vary with the number of patrons (direct maintenance and supplies) are estimated to be $1.80 per patron per hour. The number of patrons has been averaging 85,000 per year for the last three years. Is the manager right to be concerned? Provide a break-even chart in support of your conclusion.

Reference no: EM131445322

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