A tour company is planning a bus trip to a local museum. The company will lease a bus from a local bus owner for $400 and estimates that it will spend $15.00 per person for admission and lunch.

1. Which of the following volume/price alternatives will allow the firm to avoid losing money on the trip?

A. 20 customers at $30.00 each.

B. 30 customers at $27.50 each.

C. 40 customers at $25.00 each.

D. 50 customers at $22.50 each

E. 60 customers at $20.00 each.

C. 40 customers at $25.00 each

Explanation:

To avoid losing money on the Trip the total contribution from the trip should be equal to the fixed cost of $400 for car rent

contribution/person = price per trip - admission and lunch cost

Break even number of person = Fixed cost/cont per person

contribution/person minimum no of person to cover Fixed cost

A 15 400/15 = 26.7

B 12.5 400/12.5 = 32

C 10 400 / 10 = 40

D 7.5 400 / 7.5 = 53.

E 5 400 / 5 = 80

From the table above it is obvious that at a price of $25 and having 40 persons the fixed cost would be covered and no loss would be made.

C. 40 customers at $25.00 each