Reference no: EM132562060

Dyna Park maintains a water park and has experienced a steady growth in its sales for the past five years. Increased the competition, however, has led the owners to believe that an aggressive advertising campaign will be necessary next year to maintain the present growth. In order to launch advertising campaign, the next year, following data has been compiled for the year 2019.

Variable cost Rs.137.50 per ticket

Total fixed cost for the year Rs.1,350,000

Sales price Rs.250.00 per ticket

Expected sales 2019 - 20,000 ticket Rs.5,000,000

Income tax rate 35%

The resort has set sales target for 2020 at a level of Rs.5,500,000 or 22,000 tickets.

Required:

Question a) The project after tax net income for the year 2019.

Question b) Number of tickets at breakeven point during the year 2020.

Question c) After tax net income for the year 2020 if an additional fixed marketing expense of Rs.112,500 is spent on advertising in the year 2020 (with all other costs remaining constant) to attain the sales target for the year 2020.

Question d) If variable cost increases 10% what impact on breakeven in units and amount

Question e) The breakeven point in value for the year 2020 if additional Rs.112,500 is spend on advertising.

Question f) What is Margin of safety in amount of the firms during 2019 and 2020 and what is the meaning of margin of safety for Dyna Park.