Preliminary plans are under way for the construction of a new stadium for a major league baseball team. City officials have questioned the number andprofitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may buy the boxes for $310,000each. The fixed construction cost for the upper deck area is estimated to be $4,960,000, with a variable cost of $155,000 for each box constructed.(a) What is the break-even point for the number of luxury boxes in the new stadium?X =(b) Preliminary drawings for the stadium show that space is available for the construction of up to 52 luxury boxes. Promoters indicate that buyers areavailable and that all 52 could be sold if constructed.(i) What is your recommendation concerning the construction of luxury boxes?Build the luxury boxes.Do not build the luxury boxes.(ii) What profit is anticipated (in dollars)? (Enter a negative value if a predicted loss.)

Given- Fixed construction cost = $4,960,000Variable cost = $155,000 for each box constructedRevenue=…

Answered: Preliminary plans are under way for the…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 30P

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Preliminary plans are underway for construction of a new stadium for a major league baseball team. City officials question the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may purchase a box for $300,000. The fixed construction cost for the upper-deck area is estimated to be $4,500,000, with a variable cost of $150,000 for each box constructed. a. What is the breakeven point for the number of luxury boxes in the new stadium? b. Preliminary drawings for the stadium show that space is available for the construction of up to 50 luxury boxes. Promoters indicate that buyers are available and that all 50 could be sold if constructed. What is your recommendation concerning the construction of luxury boxes? What profit is anticipated?
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