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Kim is thinking of organizing a fundraiser to support a local charity. She has planned to rent a banquet hall and provide the guests with food, entertainment, and various party favors. She has decided to charge $500 a person. After researching around town, Kim has discovered the following costs:
Fixed Costs
Rental fee of banquet hall $150,000Advertising 50,000Entertainment 4,000Variable Costs Per Guest
Food $12Other miscellaneous costs 8How many guests must attend in order for Kim to break even?

Respuesta :

TomShelby

Answer:

It would need 549 guests to break even.

Explanation:

The first step will be know the Contribution Margin:

[tex]Sales \:Revenue - Variable\: Cost = Contribution \:Margin[/tex]

Variable Cost

Food 120

Other 8

Total 128

Next we do the Contribution Margin, which represent how much cash each guest generates to pay the fixed cost

500- 128 = 372

Then we Calculate the total fixed cost we need to pay

Rental 150,000

Advertising 50,000

Entertainment 4,000

Total 204,000

Now we calculate the Break Even Point in units (for this case, in guests)

[tex]\frac{Fixed\:Cost}{Contribution\: Margin} = Break \: Even \: Point_{guests}[/tex]

[tex]\frac{204,000}{372} = 548.34[/tex]

It would need 549 guests to break even.

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