a. SportZ sponsors an evening session of skating at the local arena. A family pass is offered, whereby a parent and up to two children are admitted for $12. Free hot chocolate is provided to those with the family pass. The rental of the arena for each of these sessions costs $1000. Hot chocolate costs $0.50 per person. Estimated capacity for the skating rink is 500 people.
(i) If only family passes are sold, and each includes a parent and two children, how many family passes must be sold to break even?
(ii) At break-even, what would be the total revenue?
(iii) At break-even, what percent of capacity would result?
b. Along with the development of the new helmet for ice hockey, SportZ is also making changes to the street hockey helmets it offers. For one of the most popular models, the cost of the moulds is $49 950 and the selling price would be $39.99. On the basis of sales forecasts, the company estimates that it needs to sell 1600 units to break even.
(i) What is the maximum variable cost that can be spent to make each helmet, and still break even?
(ii) If the variable cost per unit changes and the contribution rate is 85%, how many units need to be sold to break even?
c. To round out its inventory, SportZ outlet store buys and resells sports tape. For a package of eight rolls of standard tape, the store has been paying $3.48 to its supplier. The regular selling price for this package is $7.99. Advertising and promotional material for the product costs $2340.
(i) How many packages need to be sold to break even?
(ii) The supplier is offering a special promotional discount of 20% if an order of at least 1000 units is placed for each of the three winter months. If SportZ outlet store where to place this order, what is the minimum sale price it could offer and still break even?
(iii) What would be the maximum percent discount that could be offered in a sale flyer and still allow break-even?
(iv) If the packages of tape were ordered with the special promotional discount, a “25% off” sale was offered, and the store sold 950 packages of tape, how much profit or loss would SportZ outlet store make?