BIZ201 Accounting for Decision Making Assessment 4

TASK 4

Crystal hotel has accepted a corporate meeting to take place in its conference room. They are charging $120 per person that includes catering. The variable cost per attendee is $40 that includes food, cleaning and utilities. Fixed costs of $20,000 include hiring some furniture and equipment from an outside vendor. The
conference facility can hold a maximum of 800 people and early projections suggest it will be fully booked.

REQUIRED
They have asked for your expertise to carry out a CVP analysis for this meeting.
Calculate the following:
1. The contribution margin per service (a unit of service is one seat for one attendee).
2. The contribution margin ratio.
3. The annual break-even point in number of services and in dollars of service revenue.
4. The number of services required to earn a target net profit of $65,000.
5. Analysis of the importance of CVP analysis and comment on
effectiveness of this meeting based on your calculations.
6. The marketing team has suggested a gift bag be given to each attendee at the end of the conference which will help promote a positive lasting impression of the hotel. The gift bag will add an additional $5 per person to the variable cost. Comment on the implications and make recommendations for this suggestion keeping in mind the target profit.