Question 4.

[10 marks] [7 marks]

A group of schoolmates have decided to organise a party, to celebrate the end of the secondary school. This will gather all students that have finished the secondary school in 2018- 2019. Some of them have decided to manage the whole organisation of the party and managed to assemble the following expected costs for the event:

First, they plan to do some advertising which is going to cost 400 euros. The expect that the room that will have to rent for the party is going to cost 1,400 euro. They are going to need to hire somebody who is going to serve as a DJ and will have to pay him 700 euro. Each person will have to pay 16 euro per dinner, a welcome drink is going to cost 4 euros per person. The managing team is planning to set the ticket price at 32 euro per person.

Required:

(a) How many tickets must be sold for the event to break even? [6 marks]

(b) In the last year, 150 students attended the end of year party. In case that there will be the same

number, what price per ticket must be charged to break even? [6 marks]

(c) Assuming a sales level of 300 tickets, calculate the degree of operating leverage for the price of 32 euro

per ticket and for the price per ticket that you calculated to part (b) of this question. Explain your

results.

[4 marks]