Garner Strategy Institute (GSI) presents executive level training seminars nationally. Eastern University (EU) has approached GSI to present 40 one-week seminars during 2013. This activity level represents the maximum number of seminars that GSI is capable of presenting annually. GSI staff would present the week-long seminars in various cities throughout the United States and Canada. Terry Garner, GST's president, is evaluating three financial options for the revenues from Eastern: accept a flat fee for each seminar, receive a percentage of Eastern's profit before tax from the seminars, and form a joint venture to share costs and profits. Estimated costs for the 2013 seminar follow: Fixed costs for the year: Salaries and benefits Facilities Travel and hotel Other Total fixed costs: Variable costs per participant Supplies and materials Marketing Other site costs Garner Strategy Institute Eastern University $200,000 N/A 48,000 N/A 0 $210,000 70,000 N/A $318,000 $210,000 0 $47 0 18 35 Eastern's fixed costs are excluded because the amounts are not considered relevant for this decision (i.e. they will be incurred whether or not the seminars are presented). Eastern does not include these costs when calculating the profit before tax for the seminars. EU plans to charge $1,200 per participant for each one-week seminar. It will pay all variable marketing, site costs, and material costs. Assume that the seminars are handled as a joint venture by GSI and EU to pool costs and revenues. Determine the total number of seminar participants needed to break even on the total costs for this joint venture.
Garner Strategy Institute (GSI) presents executive level training seminars nationally. Eastern University (EU) has approached GSI to present 40 one-week seminars during 2013. This activity level represents the maximum number of seminars that GSI is capable of presenting annually. GSI staff would present the week-long seminars in various cities throughout the United States and Canada. Terry Garner, GST's president, is evaluating three financial options for the revenues from Eastern: accept a flat fee for each seminar, receive a percentage of Eastern's profit before tax from the seminars, and form a joint venture to share costs and profits. Estimated costs for the 2013 seminar follow: Fixed costs for the year: Salaries and benefits Facilities Travel and hotel Other Total fixed costs: Variable costs per participant Supplies and materials Marketing Other site costs Garner Strategy Institute Eastern University $200,000 N/A 48,000 N/A 0 $210,000 70,000 N/A $318,000 $210,000 0 $47 0 18 35 Eastern's fixed costs are excluded because the amounts are not considered relevant for this decision (i.e. they will be incurred whether or not the seminars are presented). Eastern does not include these costs when calculating the profit before tax for the seminars. EU plans to charge $1,200 per participant for each one-week seminar. It will pay all variable marketing, site costs, and material costs. Assume that the seminars are handled as a joint venture by GSI and EU to pool costs and revenues. Determine the total number of seminar participants needed to break even on the total costs for this joint venture.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Garner Strategy Institute (GSI) presents executive level training
seminars nationally. Eastern University (EU) has approached GSI to
present 40 one-week seminars during 2013. This activity level
represents the maximum number of seminars that GSI is capable of
presenting annually. GSI staff would present the week-long seminars
in various cities throughout the United States and Canada. Terry
Garner, GST's president, is evaluating three financial options for the
revenues from Eastern: accept a flat fee for each seminar, receive a
percentage of Eastern's profit before tax from the seminars, and form
a joint venture to share costs and profits.
Estimated costs for the 2013 seminar follow:
Fixed costs for the year:
Salaries and benefits
Facilities
Travel and hotel
Other
Total fixed costs:
Variable costs per participant
Supplies and materials
Marketing
Other site costs
Garner Strategy
Institute
Eastern
University
$200,000
N/A
48,000
N/A
0
$210,000
70,000
N/A
$318,000
$210,000
0
$47
0
18
35
Eastern's fixed costs are excluded because the amounts are not
considered relevant for this decision (i.e. they will be incurred
whether or not the seminars are presented). Eastern does not
include these costs when calculating the profit before tax for the
seminars.
EU plans to charge $1,200 per participant for each one-week seminar.
It will pay all variable marketing, site costs, and material costs.
Assume that the seminars are handled as a joint venture by GSI and
EU to pool costs and revenues. Determine the total number of
seminar participants needed to break even on the total costs for this
joint venture.
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