Question $1$

As much consideration and your quest to improve the transport in the Caribbean you and some colleagues have decided to lease a vessel to launch an inter$-$island ferry

service. You plan an introductory route from Trinidad to Barbados. Your fixed cost is estimated to $$50,000$ which related to vessel lease cost and other fixed running cost. You estimate that your variable cost per trip would be $$500$ per person, and you intend to charge a price of $$750$ per person.

A$.$ What is the minimum number of tickets you must sell to breakeven?

B$.$ How many tickets must you sell to make an intended profit of $$25,000?$

C$.$ Sketch a graph showing Total Revenue, Total Cost, Fixed Cost, the breakeven point and the operating profit and loss areas.

$(2$ marks$)$

D$.$ The vessel has a capacity for $550$ passengers, and you feel it would be good for

the image of the service to be running at $90\%$ of capacity. Given the same cost

structure what price must you charge to maintain your intended profit level of

$$25,000$ if you are running at $90\%$ capacity?

$(3$ marks$)$

E$.$ The government of Barbados is offering a subsidy of $$100$ per passenger, thus

reducing your variable cost, but stipulate that your price be capped as $$600.$ At a

price of $$600$ you estimate you can sell $350$ tickets. Is it financial prudent to

accept the subsidy?