Fun Time Inc. uses the same property and equipment to provide skiing services for six months during the winter and mountain roller boarding for six months during the summer. Monthly revenue and cost figures during the summer and winter months for Fun Time are shown below. Fun Time's $1,000 monthly fixed costs will be incurred as long as it remains in business.

Which of the following should Fun Time do if it wants to maximize its annual profit?
A) operate in both the winter and summer
B) operate in the summer, but shut down during the winter
C) operate in the winter, but shut down during the summer
D) go out of business immediately

Question

Fun Time Inc. uses the same property and equipment to provide skiing services for six months during the winter and mountain roller boarding for six months during the summer. Monthly revenue and cost figures during the summer and winter months for Fun Time are shown below. Fun Time's $1,000 monthly fixed costs will be incurred as long as it remains in business.

Which of the following should Fun Time do if it wants to maximize its annual profit?

Which of the following should Fun Time do if it wants to maximize its annual profit?
A) operate in both the winter and summer 
B) operate in the summer, but shut down during the winter 
C) operate in the winter, but shut down during the summer 
D) go out of business immediately

Quizplus · Accepted Answer

Operating in both the winter and summer will allow Fun Time to generate the highest annual profit. During the winter months, skiing generates a higher revenue than mountain roller boarding during the summer months. However, during the summer months, mountain roller boarding generates a higher revenue than skiing. By operating in both seasons, Fun Time can take advantage of the higher revenue generating activity during each season and maximize their annual profit. Shutting down during either season would result in lost revenue and lower profit potential. Going out of business immediately is not a viable option.