Question

nstructor-created question Question Help 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: Variable Cost % of Revenue Item Selling Price $1.00 $2.00 $0.70 24 Soft Drink $0.90 24 Wine $1.50 $0.35 31 Coffee $1.20 $0.25 21 Candy 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 $60.00 for each booth per night, is also fixed cost. Based on the information available, the daily break-even point in dollars for the St. Cloud Theatre Company $(round your response to two decimal places).

Answer 1

Average Selling Price = (24+24+31+21)/(24/1+24/2+31/1.5+21/1.2)

= $ 1.3483

Average Variable Cost (including 10% waste allowance) = (1+10%)*(.7*24/1+.9*24/2+.35*31/1.5+.25*21/1.2)/(24/1+24/2+31/1.5+21/1.2)

= $ 0.5815

Average contribution margin ratio = (1.3483-0.5815)/1.3483 = 0.5687

Total Fixed Cost = Labor cost + Booth rental

= 250 + 60*5

= $ 550

Daily break-even point in dollars = Total Fixed Cost / Average contribution margin ratio

= 550/0.5687

= $ 967.12