Answer the following questions using the information below:
Southwestern College is planning to hold a fundraising banquet at one of the local country clubs. It has two options for the banquet:
Southwestern College 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 business supporters will donate any other items required for the event.
-Option 1: Fixed costs of $10,000 and a breakeven point of 500 units. Option 2: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should you choose if you are expecting to produce 600 units?
A)Option one
B)Option two
C)Both options are equally desirable.
D)The best option is indeterminable.

Question

Answer the following questions using the information below:
Southwestern College is planning to hold a fundraising banquet at one of the local country clubs. It has two options for the banquet:
   Southwestern College 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 business supporters will donate any other items required for the event.
-Option 1: Fixed costs of $10,000 and a breakeven point of 500 units. Option 2: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should you choose if you are expecting to produce 600 units?
A)Option one 
B)Option two 
C)Both options are equally desirable. 
D)The best option is indeterminable.

Quizplus · Accepted Answer

Option 1 has lower fixed costs and a breakeven point that is below the expected production of 600 units, making it more desirable.

Answer the Following Questions Using the Information Below