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# Southwestern University's Food Service Southwestern University (SWU), located 30 miles southwest of the Dallas/Fort Worth metroplex, has witnessed...

Southwestern University’s Food Service

Item Selling
Price/Unit Variable
Cost/Unit Percent
Revenue
Soft drink \$1.50 \$ .75 25%
Coffee 2.00 .50 25%
Hot dogs 2.00 .80 20%
Hamburgers 2.50 1.00 20%
Misc. snacks 1.00 .40 10%

Maddux’s fixed costs are interesting. He estimated that the prorated portion of the stadium cost would be: salaries for food services at \$100,000 (\$20,000 for each of the five home games); 2,400 square feet of stadium space at \$2 per square foot per game; and six people in each of the six booths for 5 hours at \$7 an hour.

Maddux wants to be sure that he has a number of things for President Wisner: (1) break-even point in dollars for all food sales; (2) realistic sales estimates (for instance, he wants to know how many dollars each attendee is spending on food at his projected break-even if attendance grows to 70,000); (3) what sales per attendee would be if attendance remained about 27,000; and (4) what his unit sales would be at break-even, that is, what are his sales of soft drinks, coffee, hot dogs, and hamburgers. He felt this latter information would be helpful to understand how realistic the assumptions of his model are. He also wanted to be prepared for any questions that Dr. Wisner and others might bring up at the next meeting.

QUESTIONS

1. Calculate break-even point in dollars for all food sales.
2. Calculate unit sales of each item at break-even.
3. Estimate how many dollars each attendee will spend on each item at his projected break-even if attendance remains about 27,000 and if it grows to 70,000.
4. Based upon your calculations, evaluate whether Maddux's assumptions are realistic or not. Why? Why not?

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