Scenario 15-10 Vincent Operates a Scenic Tour Business in Boston. He Has

question 580

Multiple Choice

Scenario 15-10
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is: Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
-Refer to Scenario 15-10. Vincent is considering changing his pricing strategy. Which of the following options results in the highest profit per day?

• A)Charge a single price of $10 to all passengers.
• B)Charge a single price of $12 to all passengers.
• C)Charge a single price of $18 to all passengers.
• D)Continue charging each buyer his/her willingness to pay.

---

Definitions:

Machine-Hours

A measure of production time, calculated as the total number of hours machines are operated during a specific period.

Overhead Applied

The allocated portion of overhead costs assigned to individual units or activities, based on a predetermined overhead rate.

Machining Department

A segment within a manufacturing facility where machining processes such as cutting, drilling, or shaping materials are carried out.

Overhead Applied

The amount of overhead costs allocated to the production of goods or services, often based on a predetermined overhead rate.