babygirl1501
New member
- Joined
- Jul 1, 2010
- Messages
- 13
Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez’s business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times.
One of the major events Chavez’s customers request is a cocktail party. She offers a standard cocktail party and has estimated the cost per guest as follows:
Food and beverages…………………………………………………….$15.00
Labor(.5hrs @10.00/hr……………………………………………………5.00
Overhead cost (.5hrs @13.98/hr…………………………………….6.99
Total cost per guest………………………………………………………26.99
The standard cocktail party last three hours and Chavez hires one worker for every six guest, 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 31.00 per guest. She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overhead cost. The 13.98 overhead cost per labor –hour was determined by dividing total overhead expenses for the last 12 months by total labor – hours for the same period. Monthly data concerning overhead costs and labor –hours follow:
Month Labor Hours Overhead Expense cost per labor hour
January 2,500 55,000 22
February 2,800 59,000 21.07142857
March 3000 60,000 20
April 4200 64,000 15.23809524
May 4500 67,000 14.88888889
June 5500 71,000 12.90909091
July 6500 74,000 11.38461538
Auguest 7500 77,000 10.26666667
September 7000 75,000 10.71428571
October 4500 68,000 15.11111111
November 3100 62,000 20
December 6500 73,000 11.23076923
Total 57,600 805,000 13.97569444
Chavez has received a request to bid on a 180 –guest fund-raising cocktail party to be given next month by an important local charity. (The party would last the usual three hours) She would like to win this contract because the guest list for this charity event includes many prominent individuals that she would like to land as future clients. Maria is confident that these potential customers would be favorably impressed by her company’s services at the charity event.
Required:
1. Estimate the contributions to profit of standard 180-guest cocktail party if Chavez charges her usual price of 31.00 per guest ( in other worlds by how much would her overall profit increase?)
2. How long could Chavez bid for the charity event in terms of a price per guest and still not lose money on the event itself?
3. The individual who is organizing the charity’s fund raising event has indicated that he has already received a bid under 30.00 for another catering company. Do you think Chavez should bid below her normal 31.00 per guest price for the charity event? Why or why not?
One of the major events Chavez’s customers request is a cocktail party. She offers a standard cocktail party and has estimated the cost per guest as follows:
Food and beverages…………………………………………………….$15.00
Labor(.5hrs @10.00/hr……………………………………………………5.00
Overhead cost (.5hrs @13.98/hr…………………………………….6.99
Total cost per guest………………………………………………………26.99
The standard cocktail party last three hours and Chavez hires one worker for every six guest, 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 31.00 per guest. She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overhead cost. The 13.98 overhead cost per labor –hour was determined by dividing total overhead expenses for the last 12 months by total labor – hours for the same period. Monthly data concerning overhead costs and labor –hours follow:
Month Labor Hours Overhead Expense cost per labor hour
January 2,500 55,000 22
February 2,800 59,000 21.07142857
March 3000 60,000 20
April 4200 64,000 15.23809524
May 4500 67,000 14.88888889
June 5500 71,000 12.90909091
July 6500 74,000 11.38461538
Auguest 7500 77,000 10.26666667
September 7000 75,000 10.71428571
October 4500 68,000 15.11111111
November 3100 62,000 20
December 6500 73,000 11.23076923
Total 57,600 805,000 13.97569444
Chavez has received a request to bid on a 180 –guest fund-raising cocktail party to be given next month by an important local charity. (The party would last the usual three hours) She would like to win this contract because the guest list for this charity event includes many prominent individuals that she would like to land as future clients. Maria is confident that these potential customers would be favorably impressed by her company’s services at the charity event.
Required:
1. Estimate the contributions to profit of standard 180-guest cocktail party if Chavez charges her usual price of 31.00 per guest ( in other worlds by how much would her overall profit increase?)
2. How long could Chavez bid for the charity event in terms of a price per guest and still not lose money on the event itself?
3. The individual who is organizing the charity’s fund raising event has indicated that he has already received a bid under 30.00 for another catering company. Do you think Chavez should bid below her normal 31.00 per guest price for the charity event? Why or why not?