Question

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?

Answer 1

Kim must have 425 guests attend her fundraising event in order to break even, considering her total fixed costs of $204,000 and variable costs of $20 per guest with a ticket price of $500 per person.

Step-by-step explanation:

Break-Even Analysis

To calculate the number of guests needed for Kim to break even on her fundraiser, we need to consider both fixed and variable costs. The fixed costs, which include the rental fee, advertising, and entertainment, total $204,000 ($150,000 + $50,000 + $4,000). The variable costs per guest are the sum of food and miscellaneous costs, which total $20 per guest ($12 for food + $8 for miscellaneous costs). Kim is planning to charge each guest $500.

To find the break-even point, we can use the following formula:
Fixed Costs / (Price per Person - Variable Costs per Person) = Break-Even Point

Using this formula, we get $204,000 / ($500 - $20) = $204,000 / $480 = 425 guests. Therefore, Kim must have 425 guests attend her fundraising event to break even.