A seasonal bus tour firm has 5 buses with a capacity of 60 p

A seasonal bus tour firm has 5 buses with a capacity of 60 people each. Each customer pays $25 for a 1-day tour. The firm has an expense of $5/customer and a fixed annual cost of $360,000. If occupancy on the buses average 80% each day, how many days per year must the firm operate to break even?

Solution

Firm has 5 buses with a capacity of 60 people each.Total capacity=5(60)=300

Occupancy on buses is 80% each day that is 300(80/100)=240 each day

Each customer pays 25 for a one day tour

Let firm has to operate for D days to break even

Break even condition is TR=TC

Firm has expense of 5 per customer

Fixed annual cost is 360000 which has to incur before starting business.

TR=25(240)D

TC=360000+5(240)D

TR=TC

25(240)D=360000+5(240)D

6000D=360000+1200D

4800D=360000

D=75 days it has to operate for break even