Question

P7-62A (similar to) Is Question Help A traveling production of The Lion King performs each year. The average show sells 1,300 tickets at $50 per ticket. There are 100 shows each year. The show has a cast of 55, each earning an average of $340 per show. The cast is paid only after each show. The other variable expense is program printing costs of $6 per guest. Annual fixed expenses total $1,232,000. Read the requirements. Requirement 1. Compute revenue and variable expenses for each show. The revenue for each show is $ Requirements 1. Compute revenue and variable expenses for each show. 2. Use the income statement equation approach to compute the number of shows needed annually to break even. 3. Use the shortcut unit contribution margin approach to compute the number of shows needed annually to earn a profit of $4,389,000 Is this goal realistic? Give your reason. 4. Prepare The Lion King's contribution margin income statement for 100 shows each year. Report only two categories of expenses: variable and fixed. Print Done

Answer 1

Solution 1:

Revenue for each show = 1300*$50 = $65,000

Variable expenses for each show = (55*$340) + (1300*$6) = $26,500

Solution 2:

Contribution margin per show = $65,000 - $26,500 = $38,500

Let nos of break even show = X

Now at X shows net operating income = 0

Contribution margin - Fixed costs = 0

$38,500 X - $1,232,000 = 0

38500 X = $1,232,000

X = 32 shows

Solution 3:

Nos of shows needed to earn target profit = (Fixed costs + Target profit) / CM per show

= ($1,232,000 + $4,389,000) / $38,500 = 146 shows

The goal is not realistic as nos of shows in a year is 100 only.

Solution 4:

The lion King
Contribution margin income statement
Particulars	Amount
Revenue (100*$65,000)	$6,500,000.00
Variable expenses (100*$26,500)	$2,650,000.00
Contribution margin	$3,850,000.00
Fixed expenses	$1,232,000.00
Income from operations	$2,618,000.00