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 Item Soft Drink Wine Selling Price $1.20 $2.00 $1.50 $1.00 Variable Cost $0.70 $0.90 $0.35 $0.35 29 Coffee Candy Last year's manager, Scott Ellis, 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 $280.00 (5 booths with 2 people each). Even if nothing is sold, your labor cost will be $280.00, so you decide to consider this a fixed cost. Booth rental, which is a contractual cost at $60.00 for each booth per night, is also a fixed cost.

a) Based on the information​ available, the per night​ break-even point in dollars for the St. Cloud Theatre Company​ =​$ ________servings ​(round your response to one decimal​ place).

b) Based on the given​ information, the per night​ break-even point in servings for wine​ =__________ servings ​(round your response to one decimal​ place).

Answer 1

Break even point when Fixed cost = $ 280 + 5 × $ 60 = $ 580

Item selling price Soft Drink $1.20 Wine $2.00 Coffee $1.50 Candy $1.00 VC V/P $0.70 0.5833 $0.900.4500 $0.35 0.2333 $0.35 0.3500 1-V/P 0.4167 0.5500 0.7667 0.6500 %of revenue 0.25 0.26 0.29 0.2 W*(1-V/P) 0.1042 0.1430 0.2223 0.1300 0.5995

Sum of last column = 0.5995

Break even point,

FC wt Contribution

_ PED 580 = BEP = - 0.5995 = 967.4728

Break even point = $ 967.47

Number of wine servings = $ 967.47 × 0.26 / 2 = 125.77

Now, we are converting the variable cost of all the items by 10%

Variable cost, Soft Drink = $ 0.70

New variable cost = $ 0.7(1+0.1) = $ 0.77

New variable cost wine = $ 0.9×(1+0.1) = $ 0.99

Like wise we can calculate for other times too

Item selling price Soft Drink $1.20 Wine $2.00 Coffee $1.50 Candy | $1.00 VC V/P | 1-V/P $0.77 0.6417 0.3583 $0.99 0.4950 0.5050 $0.39 0.2567 0.7433 $0.39 0.3850 0.6150 %of revenue 0.25 0.26 0.29 0.2 W*(1-V/P) 0.0896 0.1313 0.2156 0.1230 0.5595

Break even point = $ 580 / 0.5595 = $ 1,036.64

Number of wine servings = $ 1,036.64 × 0.26 / 2 = 134.76

A. Based on the information​ available, the per night​break-even point in dollars for the St. Cloud Theatre Company​ =​$ 1,036.6 servings.

B. Based on the given​ information, the per night​ break-even point in servings for wine​ = 134.8 servings.

I have solved first without the change in variable cost so that you too can solve it. In question it is asked to increase the variable cost by 10% that I have solved in the second part.

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