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Saturday, 12 October 2013

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 $30 per person for the evening’s activities. Required: 1. Compute the break-even point for the Extravaganza (in terms of the number of persons that must attend). Break-even point persons 2. Assume that only 250 persons attended the Extravaganza last year. If the same number attend this year, what price per ticket must be charged to break even? (Omit the "$" sign in your response.) Ticket price per person to break even $ 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 break-even 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 2. Variable cost per person ($7 + $3) $ 10 Fixed cost per person ($8,000 ÷ 250 persons) 32 Ticket price per person to break even $ 42

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 break-even point for the Extravaganza (in terms of the number of persons that must attend).

  Break-even point persons    

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.)

  Ticket price per person to break even $    


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 break-even 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

2.
     
  Variable cost per person ($7 + $3)     $ 10  
  Fixed cost per person ($8,000 ÷ 250 persons)   32  
 

  Ticket price per person to break even     $ 42