Charleston Carriage Company offers guided horse-drawn carriage rides through his
ID: 3195558 • Letter: C
Question
Charleston Carriage Company offers guided horse-drawn carriage rides through historic Charleston, South Carolina. The carriage business is highly regulated by the city. The fare for all passengers is $19.50. Charleston Carriage has the following monthly operating costs: Fee paid to the city of Charleston Cost of souvenir set of postcards given to each passenger Monthly cost of leasing and boarding the horses Carriage drivers (tour guides) are paid on a per-passenger basis Monthly payroll costs of non tour guide employees Marketing, web-site, telephone, and other monthly fixed costs 13% of ticket revenue $0.40 per set $49,000 $2.80 per passenger $8,500 $7,500 In addition to these costs, Charleston Carriage pays a brokerage fee of $0.90 per ticket sold by brokers, on average, 60% of tickets are issued through these brokers, 40% are sold directly by Charleston Carriage. Charleston Carriage has several questions about its monthly revenues, costs, and profits in 2018.Explanation / Answer
5)
To earn $111,000 in a month, is not clear in this context. We consider for two cases :
a) Monthly Revenue - Monthly Cost = $111,000
b) Monthly Revenue = $111,000
a) Let's take the number of passengers in a month = P
Revenue = $19.50 x P
Cost = 0.13 x 19.50P + 0.4P + $49000 + 2.8P + $8500 + $7500 + $0.9 x 60/100 x P
Revenue - Cost = 111,000
19.50P - ( 2.535P + 0.4P + 2.8P + 0.54P + 49000 + 8500 + 7500 ) = 111,000
19.50P - ( 6.275P + 65000 ) = 111,000
13.225P = 111,000 + 65000
P = 176,000 / 13.225 = 13,308.13
ANSWER : Therefore, Charleston Carriage needs atleast 13,309 passengers to earn $111,000 per month in 2018.
b)
If cost isn't considered, and Earning $111,000 is equivalent to revenue of $111,000.
Then simply, 111,000 = 19.50P
P = 5,692.3
ANSWER: Therefore, they have to sell to atleast 5,693 passengers to EARN or have a REVENUE of $111,000.
6.
To earn $111,000 in a month, is not clear in this context. We consider for two cases :
a) Monthly Revenue - Monthly Cost (including tax) = $111,000
b) Monthly Revenue - Tax = $111,000
a) If tax rate is 33%, then Charleston Carriage will have to give away 33% of its revenue from ticket sales.
Therefore, the previous equation is modifed to :
Revenue - Cost = 111,000
19.50P - ( 0.33 x 19.50P (new term) + 2.535P + 0.4P + 2.8P + 0.54P + 49000 + 8500 + 7500 ) = 111,000
19.50P - (12.775P + 65,000 ) = 111,000
6.725P = 176,000
P = 176,000 / 6.725 = 26,171.0037
ANSWER : Therefore, they need atleast 26,172 passengers to earn $111,000 with 33% tax rate.
b) If cost isn't considered, and Earning $111,000 = Revenue - Tax Rate.
Then simply, 19.50P - 0.33 x 19.50P = 111,000
P = 8,538.46
ANSWER: Therefore, they need to sell to atleast 8539 passengers to earn 111,000 after getting 33% tax deducted from their revenue.
7) Here, since we have the concept of Breakeven, then we DEFINITELY need to consider cost in this question.
Breakeven --> Profit = 0 --> Revenue = Cost
P = 5,913 tickets
Revenue = 19.50P = 19.50 x 5913 = 115,303.5
Cost = 2.535P + 0.4P + 2.8P + 0.54P + 8500 + 7500 + X , where X is maximum amount that can be paid for leasing and boarding horses
Revenue = Cost
115,303.5 = 2.535P + 0.4P + 2.8P + 0.54P + 8500 + 7500 + X
115,303.5 = 6.275P + 16000 + X
X = (115,303.5 - 16000) / 6.275
X = 62,199.425
ANSWER: Therefore, they can pay a maximum amount of $62,199.425 for the horses if they want to break even each month.
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