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Ralph Newkirk is considering a bid for the hot dog and soft drink concession at the 14 football games for the season. There will be 7 college games and 7 professional games. Average attendance at college games is 30,000; at professional games attendance is 60,000. Ralph estimates that he sells one hot dog and one soft drink for each two persons attending a game.
Hot dog
Soft drink
Selling price
$1.50
$1.00
Variable costs:
0.32
Roll
0.14
Mustard, onion, etc.
0.02
Soft drink and ice
0.22
In addition, salespeople earn a 20 percent commission on all sales. Fixed costs per game are $8,000 for rentals of heating, cooking, mixing, and cooling equipment.
The stadium management requested that bids be made in the form of royalties on sales. The highest percentage of sales bid will win the contract.
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