Using the chart, I need assistance in answering the following questions w/ explanations: (The cost of the bags, which must be ordered in batches of 100) a) If this was a profit-making activity, at the entry fee of $20, what would be the profit-maximizing quantity of participants/bags? (I got 300 participants/bags) b) Use the information in the table to determine the exact breakeven quantity of participants/bags for the entry fee of $20. Use the formula Qb = F/(P – AVC). (I am not sure what to do or if I did this right. I got 113.)
Using the chart, I need assistance in answering the following questions w/ explanations: (The cost of the bags, which must be ordered in batches of 100) a) If this was a profit-making activity, at the entry fee of $20, what would be the profit-maximizing quantity of participants/bags? (I got 300 participants/bags) b) Use the information in the table to determine the exact breakeven quantity of participants/bags for the entry fee of $20. Use the formula Qb = F/(P – AVC). (I am not sure what to do or if I did this right. I got 113.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Using the chart, I need assistance in answering the following questions w/ explanations:
(The cost of the bags, which must be ordered in batches of 100)
a) If this was a profit-making activity, at the entry fee of $20, what would be the profit-maximizing quantity of participants/bags?
(I got 300 participants/bags)
b) Use the information in the table to determine the exact breakeven quantity of participants/bags for the entry fee of $20. Use the formula Qb = F/(P –
(I am not sure what to do or if I did this right. I got 113.)
Transcribed Image Text:This spreadsheet represents a cost and revenue analysis for varying numbers of participants in an event or production scenario. Below is a detailed breakdown of the columns and data:
### Columns Explained:
1. **Participants**: Number of participants ranging from 0 to 1000.
2. **Fixed Cost**: Constant cost of $1700 regardless of the number of participants.
3. **Variable Cost**: Increases with the number of participants, starting at $0 for 0 participants to $83,000 for 1000 participants.
4. **Total Cost**: Sum of Fixed and Variable Costs, increasing from $1700 for 0 participants to $84,700 for 1000 participants.
5. **Average Variable Cost**: Computed as the Variable Cost per participant, but the 0 participant entry shows a division error (#DIV/0!).
6. **Marginal Cost**: Additional cost incurred when one more participant joins, ranging from 5 to 83.
7. **TR ($20)**: Total Revenue assuming each participant contributes $20, scaling from $0 for 0 participants to $20,000 for 1000 participants.
8. **MR**: Marginal Revenue, consistently listed as $20, indicating each additional participant increases revenue by $20.
9. **TP**: Total Profit (TR - Total Cost), ranging from a loss of $-1700 for 0 participants to a loss of $-64700 for 1000 participants.
### Observations:
- **Marginal Costs** increase as more participants are added, suggesting diminishing returns to scale.
- **Total Revenue** increases linearly, as it depends solely on the number of participants times the fixed price per participant.
- **Total Profit** highlights losses across all scenarios, indicating pricing or cost inefficiencies.
This analysis provides insights into the cost structure and pricing strategy impacting profitability in this scenario. Adjustments in costs, revenues, or participant pricing may be necessary for breakeven.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education