As manager of the St. Cloud Theatre Company, you have decided that concession sa

Question

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

$0.70

26

Wine

$2.00

$1.00

26

Coffee

$1.50

$0.40

29

Candy

$1.20

$0.25

19

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 $50.00 for each booth per night, is also a fixed cost.

a) Based on the information available, the per night break-even point in dollars for the St. Cloud Theatre Company =$   (round your response to two decimalplaces).

b) Based on the given information, the per night break-even point in servings for wine = servings (round your response to one decimal place).

Item

Selling Price

Variable Cost

% of Revenue

Soft Drink

$1.00

$0.70

26

Wine

$2.00

$1.00

26

Coffee

$1.50

$0.40

29

Candy

$1.20

$0.25

19

Explanation / Answer

a. Break-even point in servings for soft drink:

Let no. of soft drinks be x

So 1*x = 0.7*x + 0.07*x + 0.26*300

So 0.23*x = 0.26*300

x = 339.13 = 340

Break even point in dollars for soft drink = 1*340 = $340

Break-even point in servings for wine:

Let no. of wines be y

So 2*y = 1*y + 0.1*y + 0.26*300

So 0.9*y = 0.26*300

y = 86.67 = 87

Break even point in dollars for wine = 2*87 = $174

Break-even point in servings for coffee:

Let no. of coffees be z

So 1.5*z = 0.4*z + 0.04*z + 0.29*300

So 1.06*z = 0.29*300

z = 82.07 = 83

Break even point in dollars for coffee = 1.5*83 = $124.50

Break-even point in servings for candy:

Let no. of candies be w

So 1.2*w = 0.25*w + 0.025*w + 0.19*300

So 0.925*w = 0.19*300

w = 61.62 = 62

Break even point in dollars for candy = 1.2*62 = $74.40

So per night break even point in dollars = 340 + 174 + 124.5 + 74.4 = $712.9

b. As calculated above, break even point in servings for wine are 87 servings.

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