Question

The local nonprofit youth symphony is planning a concert fundraiser. The organization estimates that 600 tickets can be sold for $15 per person. The fixed costs are $708. The local chamber of commerce office will process ticket orders for a fee of $3 per ticket, to relieve the youth symphony of this responsibility. (1) How many tickets does your organization have to sell to break even? (2) How many tickets does your organization have to sell to earn a profit of $4,800? (3) How much must your organization have in sales dollars to break even (rounded to the nearest cent)? (4) How much must your organization have in sales dollars to earn a profit of $4,800 (rounded to the nearest cent)? (5) What is the organization's margin of safety in units and in sales dollars? SHOW YOUR WORK BIVA - A - I E - D O NVX HTML Editora III x ! E V 12pt - Paragraph . ®

Answer 1

SOLUTION:

(1)

Given that 600 tickets can be sold for 15$ per person so total = 600*15 =9000

Tickets that have to be sold in order to breakeven is calculated is as follows:

BREAKEVEN POINTS = FIXED COST/CONTRIBUTION MARGIN PER UNIT

Fixed Cost = 708 $

Contribution Margin = Sales Revenue - Variable Cost

=9000-1800

  total contribution = 7200

   per unit =7200/600

=12/ticket

So BEP = 708/12

=59 TICKETS.

PROOF:

59(15-3)-708=0.

(2)

In order to have profit of 4800 profit how much tickets have to sell can be calculated as follows:

above solution breakeven is calculated by FC/CM,so for profit requirement we have to add targeted profit with fixed cost.

hence equation will be like

TARGET VOLUME = FIXED COST +PROFIT REQUIREMENT /CONTRIBUTION MARGIN PER UNIT

SO TARGET VOLUME = 708+4800/12

= 459 TICKETS.

PROOF:

459(15-3)-708=4800

(3)

SALES DOLLAR TO BREAKEVEN IS CALCULATED AS FOLLOWS

we found that breakeven tickets is 59,

selling price is $15

so Total Dollar Value = 59*15

= 885$

(4)

SALES DOLLAR TO HAVE PROFIT OF 4800 IS CALCULATED AS FOLLOWS:

We found that breakeven ticket to have 4800 profit is 459 tickets

selling price is $15

soTotal Dollar Value = 459*15

= 6885 $

(5)

MARGIN OF SAFETY = PLANNED SALES - BREAKEVEN SALES

SO Margin of Safety = 600-59

=541 TICKETS

Dollar Value =541*15

=8115 $