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Question 2: The Leaning Tower of Pisa is a famous tourist attraction in Italy. Adult tourists pay $8 EUR per visit, while children only have to pay $5 EUR. The maintenance cost each year for the tower is $500,000 EUR. If the revenue from the Children’s tickets covers up to 40% of the maintenance cost, how many adults need to visit the tower for the Board of Tourism to break even?

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TomShelby

Answer:

37,500 adults visits to break even

Explanation:

[tex]\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}[/tex]

In this case, we don't need to cover the ntire fixed cost with adult visits, as some portion is cover with children visits:

500,000 fixed cost

40% cover by children

500,000 - 40% = 300,000

Then each adult contribution is 8 EUR so we calculate the Break-even point in adul visits:

300,000 / 8 EUR per adult = 37,500 adults visits

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