Question

1. Southwestern College is planning to hold a fundraising banquet at one of the local country clubs. It has two options for the banquet:

Option 1: Crestview Country Club

• Fixed rental cost of $1,000
• $12 per person for food

Option 2: Tallgrass Country Club

• Fixed rental costs of $3,000
• A caterer who charges $8 per person for food

Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Thickets are expected to be $30 per person. Local business supporters will donate any other items required for the event. Which option provides the greatest degree of operating leverage if 600 people attend?

1. Option one
2. Option two
3. Both options provide equal degree of operating leverage
4. Operating leverage is indeterminable

Answer 1

Answers Option : -$30-$12 = $18 $18x600 = 10,800 10800-1000+1800+800) = 7200 (1 8x600) 2-15 is the operating Lebreroge 7200 option 2 - $30-$8422 $22x600=13200 13200-(300+1800 +500)=7600 (22x600) = 1.74 is the operating Leverage 7600 Hence option 2 is the greatest Hence, answer is B option 1.