A Cotton Candy Question
Published on October 16, 2015 by ctannehill
How many bags of cotton candy should the Mountain Home Debate team sell at each event to break even?
Last quarter, Broadview University students in the managerial accounting class collaborated together to answer this question. The idea for the project came from Julie Reed, a business administration student and grandmother to a member of the debate team.
“For our class project, they couldn’t come up with anything, and I thought that it would be a good project so John Petti, Mountain Home’s debate coach, would know how much money they would have to make,” she said.
From John, Julie gathered information like how much money the debate team needed to raise from the cotton candy sales, how much it cost to make cotton candy, and at how many events the team would be selling cotton candy. Then she and her classmates used contribution margin per unit, contribution margin ratio, and break even unit formulas to find how many bags it would take to break even.
“It was three hundred forty-seven bags per game to meet the debate team’s goal of three thousand dollars,” said Chad Gage, an accounting student.
The students then presented their answer to John as well as advantages and disadvantages of a breakeven analysis and explanations of their formulas.
John responded with pointing out variables that related to the students’ results.
“There are some factors that you can’t control,” he said. “The students run the cotton candy booth, and six percent goes to taxes.”
Rocky Jordan, a managerial accounting instructor, explained how answering the cotton candy question was beneficial to Broadview’s students. “It gave them hands-on experience of determining the break even point in a real situation, and it emphasized the need to know your costs and volume requirements to not only cover your costs but also to determine the desired profit level.”
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