QUESTION $2$

The fixed cost of the banquet department of a hotel is $$350$ a day.

A customer selected a menu for $100$ persons that would

have a food cost of $$6\mathrm{.}50$ per person, a variable wage cost

of $$2\mathrm{.}75$ per person, and other variable costs of $$1\mathrm{.}25$ per person.

REQUIRED:

a$.$ Calculate the total cost per person if this banquet were booked.

b$.$ What should be the total selling price $($sales revenue$)$ and the price per person if a $20\%$ operating income on sales revenue is wanted?

The customer does not want to pay more than $$13\mathrm{.}75$ per person for this function. She is a good customer; she has booked many functions in the banquet room in the past and is expected to do so in the future.

The function is three days from now, and there is no likelihood you will be able to book the room for any other function

Explain why you would, or would not, accept the $$13\mathrm{.}75$ per$-$person price.

Note: Assume that the hotel has only one banquet room.$)$