Cassies  is a wedding venue in the outskirts of Pretoria. Included in their packages are catering, accommodation, décor and DJ services. Although décor is included in their packages, they have been outsourcing the décor services. They are now considering running the décor service in-house. The management of Classy Weddings Ltd established that running a décor service in house will result in the following monthly costs:

Costs R

Florist salary (per month) 15 000

Florist’s commission (per wedding) 750

Labor costs (per month) 18 000

Garden maintenance costs 3 500

Additional décor items 1 500

Set-up costs (per wedding) 5 000

The management ran a regression and got the following results for their monthly décor cost data. Intercept 36 500.00 X Variable 1 5 825.00 Cassies Ltd has been outsourcing décor at a cost of R10 000 per each wedding booked at their venue

Other costs associated with running Classy Weddings Ltd venue are as follows:

• Salaries for staff members who work on a permanent basis total R50 000 per month.
• Each wedding requires ten waiters who are paid R650 each per wedding.
• Catering costs of R180 per plate provided to guests. Each wedding is expected to have 200 guests.
• The DJ is paid a fixed cost of R1 500 per month and an additional R4 500 per wedding hosted.
• Electricity and other utility bills average R3 000 per month

After taking into account the above running costs, Classy Weddings Ltd provides wedding packages to its clients at a price of R78 800 per wedding

Create a cost formula for the in-house décor services

b) Classy Weddings Ltd, has been fully booked with 150 weddings for 2021.

Should the company outsource the décor service or run the service in-house?

Support your answer with suitable calculations.

PART B Assume that Classy Weddings Ltd has decided to continue outsourcing their décor services. 

Required: 

Calculate the number of weddings that should be hosted in 2021 for Classy Weddings Ltd’s venue to break even.

Answer rating: 100% (QA)

SL NO Cassies Pretoria wedding venue for one year In Rupees In Rupees Monthly expend 1 Florists c... View the full answer