Running head: CASE STUDY SOUTHWESTERN 1

Case Study: Southwestern University

President Starr,

Here are the calculations for the five areas of concern that you mentioned to me earlier.
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1. Total fixed cost that must be covered at each of the games:

Fixed costs per game include $20,000 food service salaries,

$4,800 to cover costs of 6 booths

$1,260 hourly wages for 36 booth employees

Total fixed costs per game: 20,000 + 4,800 + 1,260 = $26,060

2. The portion of the fixed cost allocated to each of the items:

Soft drink sales need to cover 25% of fixed costs, or $6,515

Coffee sales need to cover 25% of fixed costs, or $6,515

Hot dog sales need to cover 20% of fixed costs, or $5,212

Hamburger sales need to cover 20% of fixed costs, or $5,212

Miscellaneous snacks need to cover 10% of fixed costs, or $2,606

3. What unit sales would be at break-even for each item:

A soft drink costs $0.75 and is sold for $1.50, which is $0.75 of revenue. To reach the soft drink

break-even point, $6,515/$0.75 = 8,687 must be sold.

A cup of coffee brings in $1.50 in revenue. $6,515/$1.50 = 4,343 cups of coffee need to be sold.

A hot dog brings in $1.20 in revenue. $5,212/$1.20 = 4,343 hot dogs need to be sold.
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A hamburger brings in $1.50 in revenue. $5,212/$1.50 = 3,475 hamburgers need to be sold.

A miscellaneous snack brings in $0.60 in revenue. $2,606/$0.60 = 4,343 snacks need to be sold.

4. The dollar sales for each to be at these break-even points

8,687 soft drinks at $1.50 each bring in $13,030.50.

4,343 cups of coffee at $2.00 each bring in $8,686.00

4,343 hot dogs at $2.00 bring in 8,686.00.

3,475 hamburgers at $2.50 each bring in $8,687.50

4,343 snacks at $1.00 each bring in $4,343.00

Total break-even food service sales: $43,433.00

5. Realistic sales estimates per attendee for attendance of 60,000 and 35,000.

Spending estimate per attendee for a crowd of 35,000 are $43,433/35,000 = $1.24 per attendee.

Spending estimate per attendee for a crowd of 60,000 are $43,433/60,000 = $0.72 per attendee.

Reference

Render, B., & Stair, R. (2012). Quantitative analysis for management (11th ed.). Upper Saddle

River, N.J.: Pearson Prentice Hall.

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