Question

As manager of the St. Cloud Theatre Company, you have decided that concession sales will support themselves. The following table provides the information you have been able to put together thus far: % of Revenue Soft Drink Wine Coffee Candy Selling Price $1.20 $2.00 $1.00 $1.00 Variable Cost $0.60 $1.00 $0.35 $0.25 30 18 Last year's manager, Jim Freeland, has advised you to be sure to add 10% of variable cost as a waste allowance for all categories. You estimate labor cost to be $250.00 (5 booths with 3 people each). Even if nothing is sold, your labor cost will be $250.00, so you decide to consider this a fixed cost Booth rental, which is a contractual cost at $80.00 for each booth per night, is also a fixed cost. (round your response to two a) Based on the information available, the per night break-even point in dollars for the St. Cloud Theatre Company = $ decimal places).

Answer 1

a). Calculation of Weighted average contribution margin :

Item Soft Drink Wine Coffee Candy Selling price (S.P) 1.20 2.00 1.00 1.00 Variable cost (V.C) $ 0.60 $ 1.00 $ 0.35 $ 0.25 10% Waste allowance Total Variable 1 - (T.V.C/ S.P) % of Revenue (10% *V.C) cost (T.V.C) (A) $ 0.0600 $ 0.6600 $ 0.4500 26% $ 0.1000 $ 1.1000 $ 0.4500 26% $ 0.0350 $ 0.3850 $ 0.6150 30% $ 0.0250 $ 0.2750 $ 0.7250 18% Weighted Av. Contribution (A*B) $ 0.1170 $ 0.1170 $ 0.1845 $ 0.1305 $ 0.5490

Fixed cost = Labor cost + Contractual cost
= $250 + $80*5
= $650

Per night breakeven point in dollars = $650 / $0.5490 = $1,183.97