Question 4 (25 marks) Giggles Comedy Emporium provides entertainment for birthday parties Over the last year, Giggles has entertained at over 150 birthday parties Giggles business is booming The company has parties booked solid for the next six months Customers generally must book 6 8 months in advance to secure a spot Mark Spear, the owner of Giggles Comedy Emporium, however, is worried His business is busy, his customers are extremely happy, his employees are happy, but he is barely breaking even He cannot understand, with his business being so successful, why he is barely able to pay himself a wage Mark has asked you to help him figure out what he is doing wrong The services provided at each party vary Some customers only want a clown to perform and they handle the other party details themselves Other customers want a full package food, cake, entertainment, cleanup, party favours, decorations, and costumes for the kids Mark has identified the following services that can be provided at a party Clown most, if not all, parties include a clown who performs for one hour at the party Mark pays the clown $40 for each party Food (excluding cake) when customers order food for their party through Giggles, Mark outsources this service to Carls Catering Carl charges an average of $12 per child for food Cake Mark orders birthday cakes through his sister, Sarah, who has a small bakery and makes custom cakes for Giggles Her smallest cake is 8 (which will serve up to 10 kids) and costs $40 She also makes a 10 cake for $60 (which serves 20 kids) Cleanup Giggles also provides cleanup service Cleaning staff are paid $15 per hour Cleanup averages 2 hours per 20 kids Party favours Party favours can also be ordered through Giggles These cost $5 per bag to assemble Decorations Giggles will also fully decorate a party Decorating staff are paid $15 per hour and take one hour to decorate a party for 20 kids Decorations cost an average of $50 for party of 20 kids Costumes Giggles also provides costumes for parties so the kids can dress up in a theme On average, costumes cost $40 each and can be worn 25 times before needed to be replaced Costumes are cleaned after every party at a cost of $5 each Mark has set up a fee schedule for each service as follows Service Fee charged to customer Clown $60 per party Food $15 per child Cake $2 per child Cleanup $2 per child Party favours $6 per child Decorations $2 per child Costumes $6 per child During the two weeks, Mark catered 6 parties Some details of the parties are shown below Customer 1 2 3 4 5 6 of kids attended 20 25 45 15 5 12 Clown Y Y Y Y N Y Food services Y Y N N Y N Cake Y N N Y Y N Clean up Y Y N N Y N Party favours Y Y N N y N Decorations Y Y Y N Y N Costumes N N Y N Y N REQUIRED b Mark would like to earn a return of 50 on costs What price should he have charged per child for each customer to earn a 50 return on costs How does this compare the original fee he charged per child What are the main reasons for this variance Do you have any suggestions on how Mark could adjust his fee schedule

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Question 4 (25 marks) Giggles Comedy Emporium provides entertainment for birthday parties. Over the last year, Giggles has entertained at over 150 birthday parties. Giggles

Question 4 (25 marks)

Giggles Comedy Emporium provides entertainment for birthday parties. Over the last year, Giggles has entertained at over 150 birthday parties. Giggles business is booming! The company has parties booked solid for the next six months. Customers generally must book 6-8 months in advance to secure a spot. Mark Spear, the owner of Giggles Comedy Emporium, however, is worried. His business is busy, his customers are extremely happy, his employees are happy, but he is barely breaking even. He cannot understand, with his business being so successful, why he is barely able to pay himself a wage. Mark has asked you to help him figure out what he is doing wrong.

The services provided at each party vary. Some customers only want a clown to perform and they handle the other party details themselves. Other customers want a full package food, cake, entertainment, cleanup, party favours, decorations, and costumes for the kids. Mark has identified the following services that can be provided at a party.

Clown: most, if not all, parties include a clown who performs for one hour at the party. Mark pays the clown $40 for each party.
Food (excluding cake): when customers order food for their party through Giggles, Mark outsources this service to Carls Catering. Carl charges an average of $12 per child for food.
Cake: Mark orders birthday cakes through his sister, Sarah, who has a small bakery and makes custom cakes for Giggles. Her smallest cake is 8 (which will serve up to 10 kids) and costs $40. She also makes a 10 cake for $60 (which serves 20 kids).
Cleanup: Giggles also provides cleanup service. Cleaning staff are paid $15 per hour. Cleanup averages 2 hours per 20 kids.
Party favours: Party favours can also be ordered through Giggles. These cost $5 per bag to assemble.
Decorations: Giggles will also fully decorate a party. Decorating staff are paid $15 per hour and take one hour to decorate a party for 20 kids. Decorations cost an average of $50 for party of 20 kids.
Costumes: Giggles also provides costumes for parties so the kids can dress up in a theme. On average, costumes cost $40 each and can be worn 25 times before needed to be replaced. Costumes are cleaned after every party at a cost of $5 each.

Mark has set up a fee schedule for each service as follows:

Service	Fee charged to customer
Clown	$60 per party
Food	$15 per child
Cake	$2 per child
Cleanup	$2 per child
Party favours	$6 per child
Decorations	$2 per child
Costumes	$6 per child

During the two weeks, Mark catered 6 parties. Some details of the parties are shown below:

Customer	1	2	3	4	5	6
# of kids attended	20	25	45	15	5	12
Clown	Y	Y	Y	Y	N	Y
Food services	Y	Y	N	N	Y	N
Cake	Y	N	N	Y	Y	N
Clean up	Y	Y	N	N	Y	N
Party favours	Y	Y	N	N	y	N
Decorations	Y	Y	Y	N	Y	N
Costumes	N	N	Y	N	Y	N

REQUIRED:

b. Mark would like to earn a return of 50% on costs. What price should he have charged per child for each customer to earn a 50% return on costs? How does this compare the original fee he charged per child? What are the main reasons for this variance? Do you have any suggestions on how Mark could adjust his fee schedule?