Calculate the following using the scenario and table provided below (& please show work):

Target Operating Income = (fixed costs + target operating costs)/(contribuation margin per unit)

Contribution Margin = sales price less the variable costs per unit

Break Even Point = (fixed costs)/(contribution margin per unit)

-------------------------------------

Julie Smith is the Metropolis Health Systems Director of Community Relations. She has been informed that the Health System will participate in the first area Wellness Gala, to be held at the city convention center. The gala is an annual fundraising event in which a variety of nonprofit organizations each have an opportunity to earn dollars for their cause. Individuals attending the gala will be prepared to, and are expected to, purchase items from the various booths. Julies boss wants their proceeds to go to the Health Systems auxiliary.

It is now Julies responsibility to make the financial arrangements and to coordinate the Health Systems participation in the event. Last year the booth expense was $1,000, and Julie uses this figure as her assumption of fixed cost for the coming years event. She finds a local vendor who assembles unique gift baskets. Her wholesale cost per basket will be $30 apiece, if she can place the order within 10 days (otherwise, the cost rises after the 10 days expires).

Julie believes the gift baskets will sell at the gala for a sales price of $50 apiece. She prepares a worksheet to determine what dollar amount of sales would be required to earn three ranges of operating income: $5,000, $6,250, and $7,500. Exhibit 17-3 illustrates Julies worksheet. Line number 1 contains her first set of assumptions: $1,000 fixed cost for the booth rental and $30 variable cost for each basket.

The convention center representative now e-mails Julie with news: due to a recent renovation of the convention center, booth rental fees have increased. It will cost Julie $1,500 for the booth. She then adds line 2 to her worksheet with a second set of assumptions: $1,500 fixed cost for the booth rental and the same $30 variable cost for each basket. She is now prepared to discuss her findings with her boss.

Exhibit 17-3:

			(A)	(B)	(C)
	Fixed Cost:	Variable Cost per Unit:	At $50 Sales Price per Unit, $$ Sales Required to Earn Operating Income of:	----	----
(1)	$1,000	$30	$5,000	$6,250	$7,500
(2)	$1,500	$30	$6,250	$7,500	$8,750