question archive You are serving as the chair for your community's annual wellness campaign
You are serving as the chair for your community's annual wellness campaign
Subject:EconomicsPrice:3.87 Bought7
You are serving as the chair for your community's annual wellness campaign. A key event is the annual Walk 3k, Run 10k, Ride 20k event. The event is staged entirely by volunteers and the goal is to attract community wide awareness of getting active as a key step to wellness. In other words, the goal is not to raise money, but to prompt awareness. As the chair you set a financial goal to breakeven on the one and only cost of the event, a fitness bag with the community seal and the event moto, "I AM ON THE RIGHT TRACK!
The cost of the bags, which must be ordered in batches of 100, are:
Bags Fixed Cost Variable Cost Total Cost Marginal Cost 0 1700 0 100 1700 500 200 1700 1200 300 1700 2700 400 1700 5200 500 1700 9000 600 1700 15000 700 1700 23800 800 1700 36800 900 1700 55800 1000 1700 83000
a) Complete the table.
b) You will charge an entry fee of $15 per participant. Determine the breakeven quantity of bags you must order. Remember orders must be in blocks of 100.
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Answer:
(a) The table is completed in the explanation part below.
(b) The breakeven quantity of bags I must order = 300 units.
Step-by-step explanation
(a) The table is completed below:
Here, in the question, the number of bags, fixed cost and the variable cost are already given.
The Total Cost is calculated by = Fixed Cost + Variable Cost. So, for example, the total cost for 100 bags = 1700 + 500 = 2200.
The Marginal Cost is calculated by = Change in Total Cost/Change in Quantity produced. For example, the marginal cost for 100 bags = (2200 - 1700)/(100-0) =500/100 = 5.
(b) I will charge an entry fee of $15 per participant. So, the breakeven quantity of bags you must order is where Total Cost = Total Revenue.
Total Revenue = Price * Quantity where Price is = $15.
At bags = 300 units, Total Cost = 4400 and Total Revenue = 15 * 300 = 4500. This is the closed point of Total Revenue being equal to the Total Cost because when bags = 400 units, Total Cost = 6900 and Total Revenue = 15 * 400 = 6000. At 400 units, the total cost is far higher than the total revenue.
So, the breakeven point is where, bags = 300 units. The breakeven quantity of bags I must order = 300 units.
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