The Diamond Jubilee is a floating riverboat casino that operates on the Mississippi River. Casinos attain a
Question:
The Diamond Jubilee is a floating riverboat casino that operates on the Mississippi River. Casinos attain a profit by collecting the bets/wagers placed by guests, but giving back on average a % of revenues as winnings for the customers and incurring costs of running the operations in a casino utilizing various resources. In a typical month, the casino's gambling area (excluding the food, beverages and lodging) had the following revenues and expenses:
Revenues (wagers by guests) $10,000,000
There were 500,000 guests. You can assume that all guests will wager the average amount always.
Winnings given to Guests 20% of revenues
Labor Costs (salaries) $2,000,000
Commissions for employees $700,000
(as a % of revenues)
Utilities (unrelated to guests) $600,000
Utilities (related to guests) $300,000
Depreciation on Casino buildings $2,000,000
and equipment
Other monthly admn. and facility costs $400,000
The casino pays combined state and federal taxes equal to 25% of profit before taxes.
- What is the breakeven in dollars?
- How much do Diamond Jubilee guests have to wager in a month for the casino to earn an after-tax income of $2,000,000?
- What is the operating leverage in a typical month? What will be the operating leverage if the number of guests were to drop by 50% because of an outbreak?
Operating Leverage in a typical Month -
Operating Leverage is guests dropped by 50%-
Required: For motivational purposes, the Casino wants to give the general manager a monthly bonus equal to 5% of the casino's operating income before taxes. The taxes will be paid on operating income minus bonus. How much do Diamond Jubilee guests have to wager in a month for the casino to earn an after-bonus and after-tax profit of $2,000,000?
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin