Hyundai Automobile U.S.A is sponsoring a charity golf tournament to raise monoes

Question

Hyundai Automobile U.S.A is sponsoring a charity golf tournament to raise monoes for a childern's hospital in Brimingham.There are two possible venues: RTJ Golf Resort at Pratville, which has a fixed rental cost of $6,810. The hotel provided for meals and waiters and waitresses to serve drink and finger food at $60 per person.The green fee and cart for each person will be $35. Wynlankes Golf & Country Club, which has a fixed rental cost of $ plus a charge of $ per person for its own catering of meals and serving of drinks and finger food.The green fees and cart for each person will be $40.

Explanation / Answer

Cost structure at RTJ golf resort

Total cost = Fixed cost + Variable cost.

C(RTJ) = 6810 + 95Q Q is the number of persons.

Cost structure at Wynlakes

Total cost = Fixed cost + Variable cost.

C(WL) = 2400 + 140Q Q is the number of persons.

Cost of administration and all to Hyundai = $8000

a)

Total cost at RTJ = C(RTJ) + Cost of administration and all to Hyundai

= 6810 + 95Q + 8000

= 14810 + 95Q

Total revenue by selling Q tickets = 300Q

Breakeven point is when

TR = TC

14810 + 95Q = 300Q

Q = 72.

For 72 tickets sold, the cost will be covered.

Total cost at Wynlakes = C(WL) = 2400 + 140Q  + Cost of administration and all to Hyundai

= 2400 + 140Q + 8000

= 10400 + 140Q

Total revenue by selling Q tickets = 300Q

Breakeven point is when

TR = TC

10400 + 140Q = 300Q

Q = 65

For 65 tickets sold, the cost will be covered.

b) Operating income or operating profit will be same when:

Operating income (RTJ) = Operating income (WL)

TR - TC = TR - TC

205Q - 14810 = 160Q - 10400

45Q = 4410

Q = 98

Henc, when 98 tickets are sold, operating income is same at both venues.

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