Mr Zoo is planning to set up a mini Zoo in Howick. The following relates to different pricing plans of visiting the zoo and costs of running the zoo. Pricing Plan 1 - $30 per person (a special pack will be included)Pricing Plan 2 - $25 per visitor (the special pack not to be included) Variable Costs per visitor Special Pack - $8Zoo Consumables - $7Zoo Expenses - $2 Total Fixed Costs - $200,000 REQUIRED: Study the information above then answer the following questions. Using the CVP formula, calculate the number of units (and its dollar amount) for achievingBreakevenA profit of $30,000 for both plans.Calculate the Contribution Margin ratio for both plans.Describe the meaning of Contribution Margin ratio.Explain the relationship between Contribution Margin ratio and Number of Breakeven units.Explain why it is important to calculate Margin of Safety.State TWO examples of fixed cost in relation to the zoo.Write a report to Mr Zoo for recommending which pricing plan should be adopted. Your recommendation should include at least ONE piece of financial and ONE piece of non-financial information.

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Answered: Mr Zoo is planning to set up a mini Zoo…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 5CE: Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the...

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Mr Zoo is planning to set up a mini Zoo in Howick.

The following relates to different pricing plans of visiting the zoo and costs of running the zoo.

Pricing Plan 1 - $30 per person (a special pack will be included)

Pricing Plan 2 - $25 per visitor (the special pack not to be included)

Variable Costs per visitor

Special Pack - $8

Zoo Consumables - $7

Zoo Expenses - $2

Total Fixed Costs - $200,000

REQUIRED: Study the information above then answer the following questions.

Using the CVP formula, calculate the number of units (and its dollar amount) for achieving
1. Breakeven
2. A profit of $30,000 for both plans.
Calculate the Contribution Margin ratio for both plans.
Describe the meaning of Contribution Margin ratio.
Explain the relationship between Contribution Margin ratio and Number of Breakeven units.
Explain why it is important to calculate Margin of Safety.
State TWO examples of fixed cost in relation to the zoo.
Write a report to Mr Zoo for recommending which pricing plan should be adopted. Your recommendation should include at least ONE piece of financial and ONE piece of non-financial information.

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