Chi Omega Sorority is planning its annual Riverboat Extravaganza. The Extravaganza committee has assembled the following expected costs for the event:
|Dinner (per person)||$7|
|Favors and programs (per person)||3|
|Tickets and advertising||1,400|
|Floor show and strolling entertainers||2,000|
The committee members want to charge $30 per person for the evening's activities.
1. If Chi Omega want to make a profit of $6,000 and charge $30 per ticket, how many people must buy tickets?
2. Chi Omega decides to sell tickets for $35 each and the costs will remain the same as shown in the table above. If they believe they can sell 800 tickets, what will be their margin of safety in dollars and as a percent of sales?
The Margin of Safety
The margin of safety is often calculated as part of break-even analysis. It indicates the percentage by which current sales exceed the break-even sales level.
Answer and Explanation: 1
1. To calculate the break-even sales in units we must first work out the contribution margin per ticket and the total fixed cost:
|Price per ticket...|
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fromChapter 2 / Lesson 10
Learn about the margin of safety. Understand what the margin of safety is, identify the margin of safety formula, and learn how to calculate the margin of safety.