OPTION 2: Tallgrass Country Club a. Fixed rental cost of $3,000 b. A caterer who charges $8.00 per person for food Southwestern Freight Forwarders has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local freight business supporters will donate any other items required for the event. a) Which option provides the least amount of risk? b) Which option provides the greatest operating income if 600 people attend? c) Which option provides the greatest degree of operating leverage if 600 people attend? d) Which option would you choose? Why
Southwestern Freight Forwarders is planning to hold a fundraising event to build an elementary school according to the company’s corporate social responsibility targets, at one of the local country clubs. It has two options for the event:
OPTION 1: Crestview Country Club
a. Fixed rental cost of $1,000
b. $12 per person for food
OPTION 2: Tallgrass Country Club
a. Fixed rental cost of $3,000
b. A caterer who charges $8.00 per person for food
Southwestern Freight Forwarders has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local freight business
supporters will donate any other items required for the event.
a) Which option provides the least amount of risk?
b) Which option provides the greatest operating income if 600 people attend?
c) Which option provides the greatest degree of operating leverage if 600 people attend?
d) Which option would you choose? Why?
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