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 $0.60 26
Wine $2.00 $1.00 24
Coffee $1.25 $0.40 30
Candy $0.75 $0.25 20

Last year's manager, Scott Ellis, 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 $300.00 (5 booths with 2 people each). Even if nothing is sold, your labor cost will be $300.00, so you decide to consider this a fixed cost. Booth rental, which is a contractual cost at $80.00 for each booth per night, is also a fixed cost.

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

Answer 1

The per night break-even point in dollars for the St. Cloud Theatre Company is $225.62.

Step-by-step explanation:

To find the per night break-even point in dollars for the St. Cloud Theatre Company, we need to calculate the total costs and find the amount of revenue needed to cover those costs. First, we calculate the fixed costs: labor cost of $300 for 5 booths and booth rental cost of $80 per booth, resulting in a total fixed cost of $300 + (5 booths * $80) = $700. Next, we calculate the variable costs by adding 10% of the waste allowance to the variable costs of each item: (Soft Drink: $0.60 * 1.10), (Wine: $1.00 * 1.10), (Coffee: $0.40 * 1.10), (Candy: $0.25 * 1.10). After calculating the variable costs, we sum them up to get the total variable cost. The break-even point is reached when the total revenue equals the total costs. To calculate the break-even point in dollars, we divide the total costs by the contribution margin, which is the selling price minus the variable cost. Finally, we can calculate the per night break-even point in dollars: $700 / (1.00 - ((0.60 * 1.10) + (2.00 * 1.10) + (1.25 * 1.10) + (0.75 * 1.10))). Rounding the response to two decimal places, the per night break-even point is $225.62.