Question

The chamber of commerce is planning it's July 4 gala ball. there are two possible venues.. a) country golf club which has a fixed rental cost of $2000 plus a charge of $80 per person for it's own catering of meals and serving of drinks b) Townhall which has a fixed rental cost of $6600. using Townhall the chamber of commerce can hire a caterer for meals and waiters to serve drinks at $60 per person... Note: The chamber budgets $3500 in costs of administration and marketing. The band will cost a fixed amount of $2500. Tickets to this prestige events will be $120 per person...... 1) compute breakeven point for each venue in terms of tickets sold.. 2) computer operating income if 150 attend. also for 300 attendance for the ball game

Answer 1

Ans 1: Break Even Point: It is the volume of sales at which the total cost is equal to total revenue Break Even Point Fixed Expense/Contribution per unit Venue Country Particulars Venue Townhall Golf Club Fixed Rental Cost Administration and Marketing Band Cost Total Fixed Cost $2,000 $3,500 $2,500 $8,000 $6,600 $3,500 $2,500 $12,600 Venue Country Particulars Venue Townhall Golf Club $120 $80 $40 $120 $60 $60 Ticket Price per Person Less: Variable Costs per person Contribution per person Fixed Costs Break Even Sales in Tickets Fixed Cost/ Contribution] $8,000 200.00 $12,600 210.00 [$8000/$40] [$12600/$60]

Ans 2a: Operating Income when attended by 150 person Venue Country Particulars Venue Townhall Golf Club Sales [$120 x 150] Less: Variable Cost Contribution Less: Fixed Cost $18,000 ($12,000 $6,000 $18,000 $9,000 $9,000 Fixed Rental Cost Administration and Marketing Band Cost $2,000 $3,500 $2,500 $8,000 $2,000 $6,600 $3,500 $2,500 $12,600 $3,600 Total Fixed Cost Operating Income/(Loss) Ans 2b: Operating Income when attended by 300 person Venue Country Particulars Venue Townhall Golf Club Sales [$120 x 300] Less: Variable Cost Contribution Less: Fixed Cost $36,000 24,000 $12,000 $36,000 $18,000 $18,000 Fixed Rental Cost Administration and Marketing Band Cost $2,000 $3,500 $2,500 $8,000 $4,000 $6,600 $3,500 $2,500 ($12,600 $5,400 Total Fixed Cost Operating Income/(Loss)