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.

1) How many riders would there be for both rides to have an equal cost? The answer is 4000
2) what is the operating cost for each ride, Tummy Tiger and Head Buzzer given 3000 riders?

question 2 is required only please

Answer 1

Fixed cost Tummy Tiger ride = $10,000 per year

Variable cost Tummy Tiger ride = $2.5

Fixed cost Head Buzzer = $4,000 per year

Variable cost Head Buzzer = $4

a) Let say there are X riders.

Total Cost = Fixed Cost + Variable cost

Total cost of Tummy Tiger ride = 10,000 + 2.5X

Total cost of Head Buzzer = 4,000 + 4X

To have an equal cost,

10,000 + 2.5X = 4,000 + 4X

6,000 = 1.5X

X = 4,000

If there are 4,000 riders, total cost would be same for both rides.

b) If there are 3,000 riders,

Total operating cost of Tummy Tiger ride = 10,000 + 2.5X = 10,000 + 2.5 * 3,000 = 17,500

Total operating cost of Head Buzzer = 4,000 + 4X = 4,000 + 4 * 3000 = 16,000