Case Topic: How much in sales does Boswells Beanery need to break even for its booth rental costs at a home and garden show?

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How much in sales does Boswells Beanery need to break even for its booth rental costs at a home and garden show?

MARCH 15, 2016 BY DR. WENDY TIETZ, CPA, CMA, CGMA

Source: Steve and Kerrie Collins, Wadsworth, Ohio

Boswells Beanery (Links to an external site.) is a locally-owned specialty food product company in Northeast Ohio that has been in existence for over thirty years. Its products include flavored coffees and teas, dips, dressings, sauces, and seasonings. The company attends a variety of craft and other shows throughout the year and sets up a booth at each show to sell its products. Free samples are offered to show attendees and the Boswells booth is always packed. Shows that Boswells attends include the Yankee Peddler Festival (Links to an external site.) in Canal Fulton, Ohio, theGreat Big Home + Garden Show (Links to an external site.) at the Cleveland I-X Center, and the Ohio Mart (Links to an external site.) at Stan Hywet in Akron, Ohio. Boswells also sells its products online via its website.

Each of the shows that Boswells attends has a different booth rental fee. Booth rental fees can range from $350 to $5,000 for each show.

Assume that Boswells has an average contribution margin ratio of 40% on its products.

Questions

Would the booth rental fee be considered a fixed cost or a variable cost?Assume that the booth rental fee at the Great Big Home + Garden Show is $4,200 for the ten-day show. How much in sales does Boswells need to break even on this show, assuming that the booth rental fee is the only fixed cost of the show?The home and garden show runs for ten days. How much, on average, must Boswells sell each day of the show to break even?Assume that 100,000 people visit the home and garden show each year spread evenly throughout the ten-day period. If 5% of the attendees purchase from Boswells at the show, how much must each customer purchase from Boswells for Boswells to break even on the booth rental fee?