The manager of a tourist attraction is considering whether to open on 1 January, a day when the attraction has, in previous years, been closed. The attraction has a daily capacity of 1,000 visitors. If the attraction opens for business on that day it will incur additional specific fixed costs of $30,000.
The contribution from the sale of tickets would be $25 per visitor. The number of visitors is uncertain but based on past experience it is expected to be as follows:
Probability 800 visitors 50% 900 visitors 30% 1,000 visitors 20%
It is expected that visitors will also purchase souvenirs and refreshments. The contribution which would be made from these sales has been estimated as follows:
Probability $8 per visitor 35% $10 per visitor 40% $12 per visitor 25%
(e) Calculate whether it is worthwhile opening the tourist attraction on 1 January. You should use expected value as the basis of your analysis.
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