Answer the following questions using the information below:
Southwestern College is planning to hold a fundraising banquet at one of the local country clubs. It has two options for the banquet:
Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event.
-Which option provides the greatest operating income if 600 people attend?
A)Option one
B)Option two
C)Operating incomes are identical.
D)Operating income is indeterminable.

Question

Answer the following questions using the information below:
Southwestern College is planning to hold a fundraising banquet at one of the local country clubs. It has two options for the banquet:
   Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event.
-Which option provides the greatest operating income if 600 people attend?
A)Option one 
B)Option two 
C)Operating incomes are identical. 
D)Operating income is indeterminable.

Quizplus · Accepted Answer

For option one, the total revenue would be: 
600 x $30 = $18,000

The total expenses would be: 
$1,800 (administrative and marketing expenses) + $800 (band cost) = $2,600

Therefore, the operating income would be: 
$18,000 - $2,600 = $15,400

For option two, the total revenue would be: 
600 x $35 = $21,000

The total expenses would be: 
$1,800 (administrative and marketing expenses) + $800 (band cost) = $2,600

Therefore, the operating income would be: 
$21,000 - $2,600 = $18,400

Option two provides the greatest operating income.

Answer the Following Questions Using the Information Below