1. Applie is planning to hold a fundraising dinner at one of the local hotels. It has two options for the dinner:

 

            OPTION 1:  Marriott

                              a. Fixed rental cost of $4,800

                              b. $8.00 per person for food

 

            OPTION 2:   Hyatt

                              a. Fixed rental cost of $2,500

                              b. $11 per person for food

 

In addition to the rental costs, Apple will incur an additional $1,600 administrative and marketing expenses. Apple will sell tickets for $35 per person.

 

1. Which option provides the least amount of risk? Explain. 

2. Calculate the break even point (sales or units) for each option. Which option has the lowest breakeven point?  Show your calculations. 

3. Which option Apple choose if 600 people are expected to attend? Show your calculations.

4. Which option provides the greatest degree of operating leverage if 600 people attend? How will profits change if an attendance increases by 10%? 

Answer rating: 100% (QA)

Requirement a Option 2 with lower fixed rental cost has lower risk This is because the fixed costs a... View the full answer