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Case Study #1

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13 views2 pages

Case Study #1

Uploaded by

mgn69spg5q
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case Study #1

In preparation for Dr. Starr’s upcoming meeting, we’ve gathered important details about the
sales of food and drinks at Southwestern University football games. Here’s the breakdown:

Item Selling Price/Unit Variable Cost/Unit Percent Revenue


Soft Drink $1.50 $0.75 25%
Coffee $2.00 $0.50 25%
Hot Dogs $2.00 $0.80 20%
Hamburgers $2.50 $1.00 20%
Misc. Snacks $1.00 $0.40 10%

The total fixed cost per game includes salaries, booth rental fees, and wages for booth workers’
wages:

• Salaries are $20,000.00


• Rental Fees are $2,400 x $2 = $4,800
• Booth Worker Wages consist of (6 booths x 6 workers x 5 games x $7) = $1,260

Total Fixed Cost: $20,000 + $4,800 + $1,260 = $26,060

Here’s the fixed cost allocated to each food item:

Item Percent Revenue Allocated Fixed Cost


Soft Drink 25% $6,515
Coffee 25% $6,515
Hot Dogs 20% $5,212
Hamburgers 20% $5,212
Misc. Snacks 10% $2,606

To find the break-even point for each item, we divide the allocated fixed cost by the profit
margin for each item:

Item Selling Price. Variable Cost Profit Margin Percent Rev. Allocated Fixed Cost Break-Even Volume
Soft Drink $1.50 $0.75 $0.75 25% $6,515 8,686.67
Coffee $2.00 $0.50 $1.50 25% $6,515 4,343.33
Hot Dogs $2.00 $0.80 $1.20 20% $5,212 4,343.33
Hamburgers $2.50 $1.00 $1.50 20% $5,212 3,474.67
Misc. Snacks $1.00 $0.40 $0.60 10% $2,606 4,343.33

To reach the break-even point for each item in total sales, we multiply the selling price by the
break-even volume:
Item Selling Price Break-Even Volume Dollar Volume of Sales
Soft Drink $1.50 8,686.67 $13,030.00
Coffee $2.00 4,343.33 $8,686.67
Hot Dogs $2.00 4,343.33 $8,686.67
Hamburgers $2.50 3,474.67 $8,686.67
Misc. Snacks $1.00 4,343.33 $4,343.33

In conclusion, to break even, the total sales must be $43,433.34. If there are 35,000 people
attending, each person needs to spend approximately $1.24. With an attendance of 60,000,
each person would need to spend roughly $0.72. These amounts seem achievable for reaching
the break-even point.

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