Stubs-R-Us is a local event ticket broker. Last year, the company sold 900,000 t
ID: 2571297 • Letter: S
Question
Stubs-R-Us is a local event ticket broker. Last year, the company sold 900,000 tickets with an average commission of $5. Because of the general economic climate, Stubs expects ticket volume to decline by 20 percent. In addition, employees at a local insurance company headquarters accounted for 5 percent of Stubs’ volume. The headquarters relocated to another state and all the employees closed their accounts. Offsetting these factors is the observation that the average commission per sale is likely to increase by 10 percent because the average ticket prices are expected to be larger in the coming year.
Required Estimate commission revenues for Stubs-R-Us for the coming year
Explanation / Answer
Ecpected tickets selling next year
Stub's estimate is 20% decreasd from previous yera's tickets
=900000*(900000*20%)
=720000 tickets
Companies estimate = 5% reduced drom subs estimate
=720000-(720000*5%)
=684000 tickets
New years commission = 5*1.1. (10% hike)
= 5.5
Estimate commission revenues for coming year =
684000*5.5 =$ 3762000