Question

4. You are treasurer of a professional organization that is planning a three-day conference in Chicago. The conference is to begin at 1:30 p.m. on Thursday, continue all day on Friday and end at noon on Saturday. Each person attending the meeting will have to pay a registration fee of $110. The conference hotel has quoted the following prices for services: Thursday p.m. Conference facilities rental (half day): $425; Audiovisual equipment rental: $55 Coffee-break service: $6 per person; Evening reception: S25 per person Friday Conference facilities rental: $750 Continental breakfast: $10 per person Luncheon: $15 per person; Audiovisual equipment rental: $75 Coffee-break service (morning and afternoon included): $10 per person Saturday a.m. Conference facilities rental: $375; Continental breakfast: $10 per person Coffee-break service: $6 per person; Audiovisual equipment rental: $35 Program materials and marketing will cost about $350. a) What are the average variable costs per attendee if 100 persons attend this conference? b) What are the average total costs per attendee if 100 persons attend this conference? c) How many individuals must register for the conference in order for it to break even? d) If you decide to charge some groups who would otherwise probably not attend the conference, e.g., students enrolled in graduate programs, only the marginal costs associated with their attendance, how much would you charge them?

Answer 1

a) Total variable cost of 100 people = 100*(6+25+10+15+10+10+6) = $8200

Average variable cost = $8200 / 100 = $82.

b) Total cost if 100 people attend the conference = Total fixed cost + Total Variable cost

= (425+55+750+75+375+35+350) + 8200

= 2065 + 8200

= $10265.

So, average cost per person if 100 people attend the conference = 10265 / 100 = $102.65.

c) Let the number of attendees required to breakeven be x.

So, the equation would be

2065 + 82*x = 110*x

=> 28x = 2065

=> x = 73.75.

So in order to breakeven we need 74 attendees.

d) In we were to charge marginal costs to the students who not have attended the conference, we will charge them only the average variable cost, which is $82. This is cost that is associated with their presence.

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