Question

Two new rides are being compared by a local amusement park in terms of their annual operating costs. The two rides would generate the same revenue (thus focus on operating costs). The Tummy Tiger ride has fixed costs of $10,000 per year and variable cost of $2.50 per rider. The Head Buzzer has fixed costs of $4000 per year and $4.00 per rider.

a) How many riders would there be for both rides to have an equal cost? (Please show all steps/work)

b) What is the operating cost for each ride, Tummy Tiger and Head Buzzer given 3000 riders? (Please show all steps/work)

Answer 1

a.

Let n riders are required for TC to be equal, then

TC of tummy tiger = 10000 + 2.50 *n

TC of Head buzzer = 4000 + 4*n

As per given condition

10000 + 2.50 *n = 4000 + 4*n

n = (10000 - 4000) / (4-2.5) = 4000

b.

TC of tummy tiger when 3000 riders = 10000 + 2.50 *3000 = 17500

operating cost of each ride of tummy tiger = 17500 / 3000 = 5.83

TC of Head buzzer when 3000 riders = 4000 + 4*3000 = 16000

operating cost of each ride of Head buzzer = 16000 / 3000 = 5.33