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: 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 $250.00 ( 5 booths with 2 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 decimal places).

Answer 1

The per night break-even point in dollars for the St. Cloud Theatre Company is $500.00.

Step-by-step explanation:

The per night break-even point in dollars for the St. Cloud Theatre Company can be calculated by adding together the fixed costs and the variable costs, and then dividing that sum by the contribution margin ratio. In this case, the fixed costs include the labor cost of $250.00 and the booth rental cost of $50.00 per booth per night, for a total fixed cost of $250.00 + 5 booths x $50.00 = $500.00. The variable costs, including the waste allowance, can be calculated by multiplying the total variable cost without the waste allowance by (1 + 10%). The total variable cost without the waste allowance is zero because even if nothing is sold, the labor cost will still be incurred. Therefore, the waste allowance is 10% of zero, which is also zero. So, the total variable cost is still zero. The contribution margin ratio, which is the ratio of contribution margin to revenue, can be calculated by subtracting the total variable cost from the revenue and dividing by the revenue. In this case, the revenue is the same as the per night break-even point in dollars. Therefore, the per night break-even point in dollars for the St. Cloud Theatre Company is $500.00 divided by (1-0) = $500.00.