Question

Campbell Entertainment sponsors rock concerts. The company is considering a contract to hire a band at a cost of $80,000 per concert.
Required:
a. What are the total band cost and the cost per person if concert attendance is 2,000, 3,000, 3, 500, or 4,000?
b. Is the cost of hiring the band a fixed or a variable cost?

Answer 1

Answer:

2,000 - $80,000

3,000 - $80,000

3, 500 - $80,000

4,000 - %80,000

$40

$26.67

$22.86

$20

fixed

Explanation:

Fixed costs are costs that do not vary with output. e,g, rent, mortgage payments

If production is zero or if production is a million, Mortgage payments do not change - it remains the same no matter the level of output.

the total band cost changes per concert and not per number of people attending the concert. Thus, the total band cost is constant per constant. It is fixed at $80,000 per concert regardless of the number of people at the concert

cost per person = total cost / concert attendance

$80,000 / 2,000 = $40

$80,000 / 3000 = $26.67

$80,000 / 3500 = $22.86

$80,000 / 4000 = $20