Answer the following questions using the information below:

Southwestern College is planning to hold a fund raising 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.

-Option one: Fixed costs of $10,000 and a breakeven point of 500 units. Option two: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should you choose if you are expecting to produce 600 units?
A) Option one as sales is higher than breakeven
B) Option two as sales is lower than breakeven
C) Option two as it would lead to a higher operating income
D) Option one as fixed costs is more

Question

Answer the following questions using the information below:

Southwestern College is planning to hold a fund raising 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.

-Option one: Fixed costs of $10,000 and a breakeven point of 500 units. Option two: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should you choose if you are expecting to produce 600 units?
A) Option one as sales is higher than breakeven 
B) Option two as sales is lower than breakeven 
C) Option two as it would lead to a higher operating income 
D) Option one as fixed costs is more

Quizplus · Accepted Answer

Option one should be chosen because producing 600 units exceeds the breakeven point of 500 units, leading to a profit.

Answer the Following Questions Using the Information Below