Food and drink
120
Conference materials
42
Incidental products and services
18
Total budgeted variable cost per attendee
$246
Total budgeted variable cost ($246 × 50,000 attendees)
$12,300,000
Budgeted fixed costs:
Building and facilities
$4,320,000
Management salaries
1,680,000
Total budgeted fixed costs
6,000,000
Total budgeted costs
18,300,000
Budgeted operating income
4,200,000
Budgeted revenues
$22,500,000
Budgeted revenue per conference attendee
($22,500,000 ÷ 50,000)
$450
The budgeted revenue per conference attendee is $450.
2. Quality improvements: additional menu items; additional incidental products and services;
improved facilities.
Budgeted variable cost per attendee:
Customer support and service personnel ($66 + $4)
$ 70
Food and drink ($120 + $5)
125
Conference materials ($42 + $0)
42
Incidental products and services ($18 + $3)
21
Total budgeted variable cost per attendee
$258
Budgeted revenues ($450 per attendee 70,000 attendees)
$31,500,000
Total budgeted variable costs ($258 70,000 attendees)
18,060,000
Budgeted fixed costs:
Building and facilities (4,320,000 1.50)
$6,480,000
Management salaries (1,680,000 1.50)
2,520,000
Total budgeted fixed costs
9,000,000
Total budgeted costs
27,060,000
Budgeted operating income`
$ 4,440,000
The improvements above would increase operating income from $4,200,000 to $4,440,000.
Moreover, improving the company’s meeting facilities could also lead to long-term growth.
3. Using information from requirement 2,
Revenues
$31,500,000
Fixed costs
$9,000,000
Denote total variable costs by $x
$31,500,000 – $x – $9,000,000 = $4,200,000
$x = $31,500,000 – $9,000,000 – $4,200,000
