Question

Lakeshore Cinemas is considering a contract to rent a movie for $1,980 per day. The contract...

Lakeshore Cinemas is considering a contract to rent a movie for $1,980 per day. The contract requires a minimum one-week rental period. Estimated attendance is as follows:

Monday Tuesday Wednesday Thursday Friday Saturday Sunday
450 300 200 550 1,000 1,000 500

Required

Determine the average cost per person of the movie rental contract separately for each day.

Suppose that Lakeshore chooses to price movie tickets at cost as computed in Requirement a plus $3. What price would it charge per ticket on each day of the week?

Use weekly averaging to determine a reasonable price to charge for movie tickets.

Business   Accounting   
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Answer #1

Average cost per person = Movie rent per day Estimated attendance

Price per ticket each day = Average cost per person + $ 3

Day Attendance Average cost per person Price per ticket
Monday 450 $4.40 $7.40
Tuesday 300 $6.60 $9.60
Wednesday 200 $9.90 $12.90
Thursday 550 $3.60 $6.60
Friday 1000 $1.98 $4.98
Saturday 1000 $1.98 $4.98
Sunday 500 $3.96 $6.96

Weekly average = ( $ 7.40 + $ 9.60 + $ 12.90 + $ 6.60 + $ 4.98 + $ 4.98 + $ 6.96) 7

Reasonable price to charge for movie tickets = $ 7.63

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