Question

1. Garcia Smart Seminar Services organizes seminars and other events to for companies and professional organizations. Garcia used to only organize large events (with an average of 750 attendees) and had a volume of 20 seminars per year. Recently, the firm has also been organizing smaller meetings of 100 people on average. The expansion has increased Garcia ’s total expenses to $309,000 per year, but the owner of Garcia thinks this has enhanced the company’s profits. As evidence, she points to the rapid growth of the small seminar format (100 persons per seminar, 50 seminars per year) without cutting into the number of large seminars.

When Garcia offered only large seminars, the price was determined by computing a cost per participant and adding a 40% markup. This pricing scheme is now being used to compute smaller seminars as well.

1a) Compute the price per average large seminar and the average small seminar.

1b) The owner caught fragments of a talk about activity-based costing at one of the seminars and wondered if that might apply to her business as well. As a preliminary division into cost pools, she figures that costs per participant (mailings, preparing nametags, etc.) cost $225,000 per year. The remainder of $84,000 per year relates to coordinating with the hotels and catering, organizing AV equipment, printing and hanging banners, etc.). Using activity-based costing determine the price per large seminar and the average small seminar. COMMENT on your findings.

Answer 1