Task 4 You are advising the owner of a local business that runs coach trips. The owner usually finds that an average of 60% of tickets are sold for any one trip and thinks it would be a good idea to offer remaining tickets at a discounted price to local hotels and community groups. The owner is not sure how to price the tickets and has asked for your help. The owner has provided the following information about a coach trip as an example. Coaches seat 56 people. The fixed costs of running the trip amount to £750. This includes the cost of running the coach plus paying a driver and tour guide. The variable costs of running the trip are £8.00 per passenger. This includes entrance fee to the attraction and a light lunch and refreshments. Tickets are sold full price at £40.

You are required to identify the marginal cost of a seat and recommend how this could be used to set a suitable price for the discounted tickets which will ensure they can cover fixed costs and make a profit.

You must:

Calculate the break-even point for the trip in terms of number of full price tickets sold.
Calculate the profit made if 60% of tickets are sold (round down to nearest whole number of tickets).
Identify the marginal cost of a ticket and explain how this can be used to set discount prices.
Calculate the profit made if a further 20% of seats on the trip (on top of 60% at full price) are sold to a local residential home for older people at a price of £25 each.
Explain how marginal cost can be used to set discount prices.