Required information[The following information applies to the questions displayed below.}Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez'sbusiness is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at othertimes.One of the major events Chavez's customers request is a cocktail party. She offers a standard cocktail party and hasestimated the cost per guest as follows:Food and beveragesLabor (0.5 hour e $10.00/hr.)Overhead (8.5 hour @ $13.98/hr.)$ 15.005.006.99Total cost per guest$ 26.99The standard cocktail party lasts three hours and Chavez hires one worker for every six guests, so that works out to one-half hour of labor per guest. These workers are hired only as needed and are paid only for the hours they actually work.When bidding on cocktail parties, Chavez adds a 15% markup to yield a price of about $31 per guest. She is confidentabout her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overheadcost. The $13.98 overhead cost per labor-hour was determined by dividing total overhead expenses for the last 12 monthsby total labor-hours for the same period. Monthly data concerning overhead costs and labor-hours follow:OverheadMonthLabor-HoursExpenses$ 55,00059,00068,000JanuaryFebruaryMarch2,5002,8003,000AprilMayJune64,00067,0004,2004,500JulyAugustSeptemberOctoberNovember5, 5006, 5007,5007,0004, see3,10071,00074,00077,00075,00068,00062, 00073,000$ 805,000December6,500Total57,600Chavez has received a request to bid on a 180-guest fundraising cocktail party to be given next month by an importantlocal charity. (The party would last the usual three hours.) She would like to win this contract because the guest list for thischarity event includes many prominent individuals that she would like to secure as future clients. Maria is confident thatthese potential customers would be favorably impressed by her company's services at the charity event.3. If Chavez charges her usual price of $31 per guest for the 180-guest cocktail party, how much contribution margin will she earn byserving this event? (Round your intermediate calculations and final answer to 2 decimal places.)Total contribution margin4. How low could Chavez bid for the charity event in terms of a price per guest and still break even on the event itself? (Round youranswer to the nearest whole dollar amount.)Bid price per guest

Contribution Margin = Selling Price per guest - Total cost per guest Breakeven point = Total cost…

3. If Chavez charges her usual price of $31 per guest for the 180-guest cocktail party, how much contribution margin will she earn by serving this event? (Round your intermediate calculations and final answer to 2 decimal places.) Total contribution margin 4. How low could Chavez bid for the charity event in terms of a price per guest and still break even on the event itself? (Round your answer to the nearest whole dollar amount.) Bid price per guest

3. If Chavez charges her usual price of $31 per guest for the 180-guest cocktail party, how much contribution margin will she earn by serving this event? (Round your intermediate calculations and final answer to 2 decimal places.) Total contribution margin 4. How low could Chavez bid for the charity event in terms of a price per guest and still break even on the event itself? (Round your answer to the nearest whole dollar amount.) Bid price per guest

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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