The Fete Budget Squeeze
A school fete committee expects 480 visitors. Entry is free. Revenue comes from a cake stall (expected 220 items at $3.50 each, cost $1.20 per item), a raffle (300 tickets at $2 each, prize costs already donated), and a plant stall (140 plants at $6 each, cost $2.50 per plant). Fixed costs are $850 for equipment hire and $310 for insurance. The committee also budgeted $200 for advertising but has already spent $260. A sponsor has pledged $500 but will only pay if total visitor numbers exceed 450. The principal has asked the committee to confirm the fete will make at least $1,500 profit before approving it.
1. Calculate the expected profit and determine whether the $1,500 target is met.
Read the worked answer
Cake stall: revenue 220 × $3.50 = $770; cost 220 × $1.20 = $264; margin = $506. Raffle: 300 × $2 = $600; prizes donated, so margin = $600. Plant stall: revenue 140 × $6 = $840; cost 140 × $2.50 = $350; margin = $490. Sponsor: 480 visitors > 450, so $500 counts.
Total income-side contribution = 506 + 600 + 490 + 500 = $2,096.
Costs: equipment $850 + insurance $310 + advertising actually spent $260 = $1,420.
Profit = $2,096 − $1,420 = $676.
The $1,500 target is not met - short by $824. Note the advertising overrun ($60) reduces profit but is not the main gap; the structural shortfall is larger.
2. The committee wants to reach $1,500 profit. Suggest a realistic adjustment and test it.
Read the worked answer
The gap is $824. Options:
- Raise cake prices from $3.50 to $4.50: extra $1.00 × 220 = $220. Not enough alone.
- Increase raffle sales to 500 tickets at $2: extra 200 × $2 = $400. Combined with option 1 gives $620 - still short.
- Add a second sponsor at $500, plus price rise ($220) and extra raffle ($400) = $1,120, clearing the gap with margin.
A defensible answer picks a combination and tests the arithmetic. For example: cake price to $4.50 (+$220), raffle to 500 tickets (+$400), and a $250 plant-stall boost via 40 extra plants at $6 with $2.50 cost (+$140) gives $760 - still short by $64. So the committee must add at least one more lever, such as a second sponsor or higher plant sales.
The judgement being tested: recognising that single small tweaks cannot close an $824 gap, and that assumptions about visitor willingness to pay should be stated.