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Don Niyo Pub organises beach party for university students under the name Pretty Babes Chill Out. Due to control and safety concerns, Don Niyo Pub
Don Niyo Pub organises beach party for university students under the name Pretty Babes Chill Out. Due to control and safety concerns, Don Niyo Pub has set an activity level of 250 participants. Presently, he is planning a beach party in collaboration of the Ashesi Students Council as part of their AJC week celebrations. The typical costs he incurs are entry ticket, GHS10 per person; a set of bikinis or shorts per person, GHS 35 per set, a pack of food and drinks per person, GHS 30 per pack; wages to a team of live guards for the level of activity, GHS 1000 for the team; shuttle service, GHS500 per round trip for the level of activity, fixed administrative expenses per beach party, GHS100. Don Niyo Pub plans to charge each participant a fee of GHS130 for the entire package. Required: (2) Using the activity level of 250 participants, compute the degree of operating leverage. [4 Marks] Using the degree of operating leverage you computed, determine the percentage change in net operating income when number of participants falls below the activity level by 25%. [2 Marks] Estimate the break-even point in terms of number of participants and then in cedi valze. [4 Marks] (d) If Don Niyo Pub wishes to earn GHS 1200 in net operating income for the coming party, how many participants should he obtain? [2 Marks] Compute the margin of safety in units and in terms of percentage. Explain your answer? [2 Marks] (E) Suppose another person is organising a similar party and Don Niyo Pub is worcied about losing potential customers. To deal with that, he plans to grant a discount of 15% off the fee; and give each participant a medium-size towel, which costs GHS5.5 each. How will this affect his break-even point? (Suppose your answer with relevant computations) [4 Marks] [Total = 20 Marks ]
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