PPP is a theme park. The following information is available for the forthcoming month:Forecast daily ticket sales and prices

The theme park will be open for 30 days in the month.CostsVariable costs per person per day are forecast to be $12.50.Fixed costs for the month are forecast to be $6 500 000.Pricing informationThe sales of pre-booked discounted tickets and standard tickets will be restricted to 1500 and 8000 per day respectively for the forthcoming month. It is forecast that all of these tickets will be sold.A premium family ticket admits four people to the theme park and allows them to go to the front of the queues in the theme park. The price of a premium family ticket has been set at $185 in order to maximize the profit from the sale of these tickets for the month. Market information shows that for every $5 increase in the selling price of a premium family ticket the demand would reduce by 25 tickets, and that for every $5 decrease in the selling price the demand would increase by 25 tickets.The theme park has adequate capacity to accommodate any level of demand for premium family tickets. It is to be assumed that four people would always be admitted on every premium family ticket sold.

Sales of the different ticket types are independent of each other.Equipment hirePPP is considering hiring some automated ticket reading equipment for the forthcoming month. The hire of this equipment would increase fixed costs by $250 000 for the month. However, variable costs per person would be reduced by 8 percent during the period of the hire.

Required:(a) Calculate the financial benefit of hiring the equipment for the forthcoming month given its impact on variable cost and therefore the price charged for premium family tickets.

If P = a - ?bx then MR = a - 2bx

It has now been realized that a competing theme park is planning to offer discounted ticket prices during the forthcoming months. It is thought that this will reduce the demand for PPP?s standard tickets. PPP will not be able to reduce the price of the standard tickets for the forthcoming month.

(b) Discuss the sensitivity of the decision to hire the equipment to a change in the number of standard tickets sold per day. (Note: your answer should include the calculation of the sensitivity).PPP produces an annual budget. The annual budget includes details of budgeted ticket sales volumes, revenues and costs for each month. Each month PPP compares actual performance against the budget for that month.

At the start of every month, PPP conducts a review of its competitors to produce a revised forecast for ticket sales. This revised sales forecast is used to devise pricing policies and promotional campaigns to ensure that budgeted targets are met.

(c) Compare and contrast the use of feed forward control and feedback control, using the information given above about PPP to illustrate your answer.

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Price per Ticket sales ticket $29 Pre-booked discounted ticket 1500 $39 Standard ticket 8000 Premium family ticket (admits four people) $185 675