Question

The MVSU Student Association (MVSUSA) is planning a fundraising event for the spring semester. The MVSUSA is planning to hire the B B King Band as entertaining for a fee of $750. The BB King Museum in Indianola was selected as the site for the event. The Museum will charge the MVSUSA $600 for the use of it's banquet room. Thompson's Hospitality was selected to cater the event. Thompson's Hospitality will charge the MVSUSA a flat fee of $400 and an additional charge of $20 per meal.

a) The MVSUSA expects a total of 250 students and alumni to attend its spring fundraising event. What is the break-even ticket price?

b) The MVSUSA is considering charging two different ticket prices: $25 for students and $75 for alumni. If the expected ratio of students to alumni is three to one, how many student tickets and how many alumni tickets must each be sold in order for the spring fundraising event to break-even?

Answer 1

a)

Fixed Cost	Band Hiring	$     750.00
	banquet Charge	$     600.00
	Hospitality Charge	$     400.00
	Total Fixed cost	$ 1,750.00
Variable cost per Student	Meal	$        20.00
	Number of students	$     250.00
	Total variable cost	$ 5,000.00
	Total cost	$ 6,750.00
Breakeven ticket Price
Total cost/expected no of students	6750/250
	$                        27.00

b)

	Students	Alumni
Sales Price	25	75
Variable cost	20	20
Contribution Margin	5	55
Contribution Margin ratio	20%	73.33%
Sell 3 to students 1 to alumni	0.75	0.25
	3.75	13.75
Weighted Contribution Margin	17.5
Fixed Cost	$                       1,750.00
Breakeven Sales in Units	100.00
Students (0.75*100)	75
Alimni (0.25*100)	25