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Exercise 2-15A Averaging costs LO 2-5 Zachary Camps, Inc. leases the land on which it builds camp sites. Zachary is consideri

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Answer #1

Fixed cost (Rent)= $4,800 per month

Variable cost per camper = $4

Profit per camper = $9

Let the price to be charged in February be $K per camper

Number of campers in February = 370

Profit in February = Number of campers in February x Profit per camper

= 370 x 9

= $3,330

Sales revenue in February = Number of campers in February x Price per camper

= 370K

Total variable cost in February = Number of campers in February x variable cost per camper

= 370 x 4

= $1,480

Profit = Sales - Variable cost - Fixed cost

3,330 = 370K - 1,480 - 4,800

370K = 9,610

K = $25.97297297297

Hence, price to be charged in February = $25.97297297297 per camper

Price to be charged for a camp site in February = Number of campers in February x Price per camper

= 370 x 25.97297297297

= $9,610

Let the price to be charged in August be $M per camper

Number of campers in February = 790

Profit in August = Number of campers in August x Profit per camper

= 790 x 9

= $7,110

Sales revenue in August = Number of campers in August x Price per camper

= 790M

Total variable cost in August = Number of campers in August x Variable cost per camper

= 790 x 4

= $3,160

Profit = Sales - Variable cost - Fixed cost

7,110 = 790M - 3,160 - 4,800

790M = 15,070

M = $19.075949367088

Hence, price to be charged in August = $19.075949367088 per camper

Price to be charged for a camp site in August = Number of campers in August x Price per camper

= 790 x 19.075949367088

= $15,070

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubt. Thanks.

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