Answer (C) is correct . The breakeven point in units equals total fixed costs ($150,000 + $50,000 + $4,000 = $204,000) divided by the unit contribution margin ($500 selling price – $12 food – $8 other = $480). Kim’s breakeven number of guests is thus 425 ($204,000 ÷ $480).
Answer (A) is incorrect because Not subtracting variable costs from revenues to get the contribution margin results in 408.
Answer (B) is incorrect because Not including the $4,000 of entertainment expenses in the fixed cost results in 417.
Answer (D) is incorrect because Subtracting variable cost from the contribution margin results in 443.
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How many guests must attend in order for Kim to break even?
