Paradox Escape Room Ltd has 10 locations in the local area. One of the locations is exclusively horror-themed escape rooms and the location consistently breaks even. The revenue and costs details for the escape room are listed below. The company is evaluating whether to close the horror-themed location or change it to a “Million Dollar Listing Virtual Reality” escape room. If it is changed to a “Million Dollar Listing” theme, the forecasted monthly revenue is $150,000, variable staffing and merchandise costs will increase $5,000, and fixed costs will increase by $10,000. All other costs remain the same.
Part 1: Prepare two differential analyses. Remember that each analysis will compare the current situation to the change. Show your work.
Part 2: As the financial analyst, you believe there is a fourth option to make the escape room more profitable. Describe your plan to increase profitability.
Discussion Response Due by Saturday: Review another student’s fourth option (Part 2) and evaluate their profitability plan.
| Continue/Discontinue | Continue | Discontinue | Differential Analysis |
| Revenue | $ 102,000 | ||
| Costs | |||
| Variable staffing and merchandise expenses | ($ 45,500) | ||
| Variable selling expenses | ($ 21,500) | ||
| Fixed costs | ($ 35,000) | ||
| Profit (loss) | $ – | ||
| Continue/Million Dollar Listing | Continue | “Million Dollar” | Differential Analysis |
| Revenue | $ 102,000 | ||
| Costs | |||
| Variable staffing and merchandise expenses | ($ 45,500) | ||
| Variable selling expenses | ($ 21,500) | ||
| Fixed costs | ($ 35,000) | ||
| Profit (loss) | $ – |
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