As manager of the St. Cloud Theatre Company, you have decided that concession sa
ID: 352863 • Letter: A
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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:
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: Selling Price $1.20 $1.75 $1.00 $1.20 Variable Cost S0.60 0.90 S0.40 S0.35 % of Revenue tem Soft Drink Wine Coffee Candy 24 29 23 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 = S round your response to two decimal placesExplanation / Answer
It is to be noted :
Contribution margin / unit = Selling price/ unit – Variable cost / unit – Waste allowance / unit
Assuming total breakeven sales of $1000 , amount of revenue for each item = $ 1000 x Percentage of revenue for that item ( %)
Proportionate contribution margin for each item
= Number of units x Contribution margin / unit
= Amount of revenue/ Selling price per unit x contribution margin per unit ( $)
Thus, sum of proportionate contribution margin for every $1000 sales = $530.84
Item
Selling price/ unit($)
Variable cost/Unit($)
Waste allowance/Unit ,$(10 pct of variable cost)
Contribution margin/unit ( $)
Amount of Revenue($)
Proportionate contribution margin. $
Soft drinks
1.20
0.6
0.06
0.54
240
108
Wine
1.75
0.90
0.09
0.76
240
104.23
Coffee
1.0
0.40
0.04
0.56
290
162.40
Candy
1.20
0.35
0.035
0.815
230
156.21
Sum =
530.84
Break up of fixed cost :
Total fixed cost = $250 + $250 = $500
At breakeven quantity .
Total contribution margin = Total fixed cost
Since total contribution margin of $530.84 is earned for every $1000 sales.
Corresponding amount of sales for total $500 contribution margin = $1000/530.84 x 500 = 941.90
BASED ON INFORMATION AVAILABLE , DAILY BREAKEVEN POINT IN DOLLARS FOR ST CLOUD THEATTRE COMPANY = $941.90
Amount of wine expected to be sold at breakeven point
= 24% of $941.90
= $226.06
AMOUNT OF WINE EXPECTED TO BE SOLD AT BREAKEVEN POINT = $226.06
Item
Selling price/ unit($)
Variable cost/Unit($)
Waste allowance/Unit ,$(10 pct of variable cost)
Contribution margin/unit ( $)
Amount of Revenue($)
Proportionate contribution margin. $
Soft drinks
1.20
0.6
0.06
0.54
240
108
Wine
1.75
0.90
0.09
0.76
240
104.23
Coffee
1.0
0.40
0.04
0.56
290
162.40
Candy
1.20
0.35
0.035
0.815
230
156.21
Sum =
530.84
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