Question

Camp Rainbow offers overnight summer camp programs for children ages 10-14 every summer during June and July. Each camp session is one week and can accommodate up to 200 children. The camp is not coed, so boys attend during the odd-numbered weeks and girls attend during the even-numbered weeks. While at the camp, participants make crafts, participate in various sports, help care for the camp's resident animals, have cookouts and hayrides, and help assemble toys for local underprivileged children. The camp provides all food as well as materials for all craft classes and the toys to be assembled. One cabin can accommodate up to 10 children, and one camp counselor is assigned to each cabin. Three camp managers are on-site regardless of the number of campers enrolled. Following is the cost information for Camp Rainbow's operations last summer: Week 192 174 Number of Cost to Run Campers mpers Camp $14,340 13,510 122 9,710 118 9,160 152 12,590 120 9,920 130 9,110 132 10,680 Coefficients Intercept 82.00 Number of Campers 75.95 Suppose that Rainbow is contemplating staying open one additional week during the summer.

Answer 1

Part 1

Unit contribution margin	$75.05	Per camper
Contribution margin ratio	49.7	%

Unit contribution margin=Sales price – Variable cost per unit=$ 151 – $ 75.95=$75.05 Per camper

Contribution margin ratio =Unit contribution margin / Sales price= $75.05 / $151= 49.7%

Part 2

CAMP RAINBOW Contribution Margin Income Statement For Possible 9th Week
Sales revenue (104*151)	15704
Variable costs (104*75.95)	7898.80
Contribution margin	7805.20
Fixed costs	80
Net operating income	$7725.20

Part 3

Should Rainbow add the 9th week because it will generate income for the camp?

Yes

It should add the 9th week as it will generate income for the camp.