Problem -
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
|
Item
|
Selling Price
|
Variable Cost
|
% of Revenue
|
|
Soft drink
|
$1.00
|
$.65
|
25
|
|
Wine
|
1.75
|
.95
|
25
|
|
Coffee
|
1.00
|
.30
|
30
|
|
Candy
|
1.00
|
.30
|
20
|
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 2 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 $50.00 for each booth per night, is also a fixed cost.
a) What is the break-even volume per evening performance?
b) How much wine would you expect to sell each evening at the break-even point?