The Windsor Chamber of Commerce is planning its annual event, the "Spring Gala".

There are two possible plans:

a. Hold the event at a local hotel. The fixed rental cost would be $2,700 and the charge

for meals would be $110 per person.

b. Hold the event at the University of Windsor. The fixed rental fee for the facility would

be much higher at $7,000, and the Chamber would also spend another $500 in

permits. However, the Chamber could use the local caterer and the per-unit charge

for meals would drop to $75 per person.

The Chamber of Commerce budgets $5,000 for administration and marketing for the

Spring Gala event. Entertainment will cost $4,000 regardless of the venue chosen. The

cost of tickets to the "Spring Gala" event will be $175 per person. All other costs, such

as door prizes and drinks, will be paid for by corporate sponsors, therefore there are no

additional costs for the Chamber of Commerce to incur.

1. Compute the breakeven point for each plan in terms of tickets sold.

2. For each plan, compute the operating income of the event (a) if 100 people attend,

(b) if 250 people attend. Comment briefly on your results.

3. At what level of tickets sold will the two plans have the same net operating income?

What is the net operating income?

4. The after tax operating income for the event must be at least 5,000. For each plan

what level of sales in tickets is required to provide this after tax income. The tax rate

is 30%.

5. Considering the original scenario in plan a (the hotel). The hotel now states that a

guarantee of 250 or more guest will decrease the per guest charge by 15% for all

guests. What is the new breakeven point? Please comment on the new breakeven

point. Which venue would you recommend, if the event organizers stated there is a

90% chance of selling more than 250 tickets? Please discuss briefly.