Cooley\'s Beanery is a locally owned specialty food product company in Northeast
ID: 2399332 • Letter: C
Question
Cooley's Beanery is a locally owned specialty food product company in Northeast Each of the shows that Cooley's attends has a diferent booth rental fee. Booth Ohio that has been in existence for over 30 years. Its products include flavored coffees and teas, dips, dressings, sauces, and seasonings rental fees can range from $800 to $6,000 for each show. Assume that the booth rental fee at the Great Big Home+ Garden Show is $3,920 for the ten-day show and that Cooley's has an average contribution margin ratio of 40% on its products. (Click the icon to view additional information.) Read the reguirements Requirement 1. How much in sales does Cooley's noed to break even on the Great Big Home+Garden Show, assuming that the booth rental fee is the only fxed cost of the show?Explanation / Answer
Req 1) Fixed costs - booth rental fee = $3920 Contribution margin = 40% Break even point in dollars = (Fixed exp + Operating Income) / Contribution margin in percent Break even point in dollars = (3920 + 0) / 40% = $9800 Req 2) Cooley's must sell to break even each day = $9800 / 10 = $980 Req 3) Purchase from Cooley's by attendees = 900000 * 1% = 9000 people The purchase amount needed per customer to Break even= Amount to break even / Attendees purchase from Cooley The purchase amount needed per customer to Break even= $9800 / 9000 people = $1.09 per customer Req 4) target profit = $3600 Target Contribution = Fixed costs + target profit = 3920 + 3600= $7520 Cooley's sales volume must be $ = Target Contribution / Contribution margin in percent Cooley's sales volume must be $ = $7520 / 40% = $18800 to achieve the target profit.