Boards 4 Brides customizes standard board games to depict places and events for
ID: 2457147 • Letter: B
Question
Boards 4 Brides customizes standard board games to depict places and events for the happy couple. These are then provided to the guests at the wedding reception. Boards 4 Brides has the following historical information and is going to use the High – Low method to determine its pricing schedule.
Using the following data, determine what Boards 4 Brides must charge for a wedding with 500 guests in order to show a profit of $1,200.
# Persons $ Costs
200 $ 1700
700 $ 5200
380 $ 3040
900 $ 6850
425 $ 3500
Explanation / Answer
Using high low method
Variable cost per unit = (6850-1700)/(900-200)
=7.357
Fixed cost = total cost – units x variable cost per unit
= 6850 – (900 x7.357)
= 228.57
We have 500 guests, so total expense would be
Total cost = fixed cost + variable cost
= 228.57 + 7.357 x 500
= 3907.07
Total revenue = total cost + desired profit
= 3907.07 +1200
= 5107.07