Workshop Break-Even Decision
An arts charity is planning a one-day workshop. Fixed costs are: venue £600, printing £150, entertainment £400 and insurance £120. Catering costs £8 per attendee. The ticket price is £14 and expected attendance is 180. The organiser is also considering adding a paid facilitator at a fixed cost of £300; this would not change the ticket price or the catering cost. The board has said the event must not make a loss, and has asked for the minimum attendance needed under each option before approving anything. The organiser is keen on the facilitator and has described it as 'cost-neutral because it pays for itself'.
1. Calculate the break-even attendance for the base event and state whether it should proceed at 180 attendees.
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Fixed costs = 600 + 150 + 400 + 120 = £1,270. Contribution per ticket = £14 − £8 = £6. Break-even = 1,270 ÷ 6 = 211.67, so 212 attendees. At 180: contribution = 180 × 6 = £1,080, giving a loss of £190. The event should not proceed on these numbers unless attendance can be lifted by 32 people or fixed or variable costs can be cut. Note that break-even must be rounded up: 211 attendees still leaves a small loss.
2. With the £300 facilitator, what is the new break-even attendance, and how many extra attendees must the facilitator bring simply to pay for itself?
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New fixed costs = 1,270 + 300 = £1,570. Break-even = 1,570 ÷ 6 = 261.67, so 262 attendees. The facilitator costs £300 and each attendee contributes £6, so it needs 300 ÷ 6 = 50 additional attendees to cover its own cost. At 180 + 50 = 230 attendees the loss is unchanged at £190. The facilitator improves the result only if it attracts more than 50 extra people, and it satisfies the board's no-loss rule only at 262 or more.
3. The organiser forecasts the facilitator would raise attendance to 240. Advise the board, applying its no-loss rule.
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At 240 attendees, contribution = 240 × 6 = £1,440 against fixed costs of £1,570, a loss of £130. The facilitator does cover its own cost, since 60 extra attendees × £6 = £360 exceeds £300. But the event still fails the board's no-loss rule, which needs 262. The correct advice is to reject the facilitator as specified, or approve it only if the ticket price rises, costs fall, or attendance can credibly reach 262. 'It pays for itself' is not the same test as 'the event breaks even'.