Question: Selecting the appropriate time period for cost averaging The Vaughan Amusement Park is considering signing a contract to hire a circus at a cost of

Selecting the appropriate time period for cost averaging The Vaughan Amusement Park is considering signing a contract to hire a circus at a cost of $2,400 per day. The contract requires a minimum performance period of one week. Estimated circus attendance is as follows:

Monday Tuesday Thursday Friday Saturday Sunday Wednesday 450 500 450 600 950 1,400 1,500

.:.

Required

a. For each day, determine the average cost of the circus contract per person attending.

b. Suppose that the park prices circus tickets at cost as computed in Requirement a plus $1.60. What would be the price per ticket charged on each day of the week?

c. Use weekly averaging to determine a reasonable price to charge for the circus tickets.

d. Comment on why weekly averaging may be more useful to business managers than daily averaging.

Monday Tuesday Thursday Friday Saturday Sunday Wednesday 450 500 450 600 950 1,400 1,500

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