Selecting the appropriate time period for cost averaging The Bullion Amusement Park is considerin

Selecting the appropriate time period for cost averaging The Bullion Amusement Park is considering signing a contract to hire a circus at a cost of $2,700 per day. The contract requires a minimum performance period of one week. Estimated circus attendance is as follows.

Monday

Tuesday

Wednesday

Thursday

Friday

Saturday

Sunday

600

500

450

700

960

1,450

1,340

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 $1.80. 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.

 

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