Chi
Omega Sorority is planning its annual Riverboat Extravaganza. The
Extravaganza committee has assembled the following expected costs for
the event:
 
Dinner (per person)  $7 
Favors and program (per person)  $3 
Band  $1,500 
Tickets and advertising  $700 
Riverboat rental  $4,800 
Floorshow and strolling entertainers  $1,000 

The committee members would like to charge $30 per person for the evening’s activities. 
Required: 
1. 
Compute the breakeven point for the Extravaganza (in terms of the number of persons that must attend).

2. 
Assume
that only 250 persons attended the Extravaganza last year. If the same
number attend this year, what price per ticket must be charged to break
even? (Omit the "$" sign in your response.)

Explanation:
1. 
The contribution margin per person would be: 
    
Price per ticket    $  30 
Variable expenses:     
Dinner  $  7   
Favors and program   3   10 





Contribution margin per person    $  20 
  



The fixed expenses of the Extravaganza total $8,000; therefore, the breakeven point would be computed as follows:

Profit  =  (Unit CM × Q) − Fixed expenses 
$0  =  (($30 − $10) × Q) − $8,000 
$0  =  ($20 × Q) − $8,000 
$20Q  =  $8,000 
Q  =  $8,000 ÷ $20 
Q  =  400 persons; or, at $30 per person, $12,000 
  
Variable cost per person ($7 + $3)  $  10 
Fixed cost per person ($8,000 ÷ 250 persons)   32 



Ticket price per person to break even  $  42 



