Question

1. Under the current scenario, Madison Production Company can expect total profit of ________________________________. The company needs the show to run for ______________________weeks in order to break even.   

2. In order to earn a net profit of at least $21,000,000 by running the show for 90 weeks, the company must sell the tickets for at least ______________.

3. If MPC can lower the ticket price to $40 (all else remaining the same), then ________________ additional weeks are needed for the company to break even.

4. On the other hand, if MPC can raise the ticket price to $55 (all else remaining the same), net profit will be _________________________ and the company will need ________________ weeks to break even.

5. The Madison Production Company will need to run the show for _________________ weeks in order to recover the development cost of the show. I used _____________________________ to determine this.

Madison Production Company is thinking of opening a Broadway play, “Hunger Games”. It will cost $5 million to develop the show and another $1,000 to open up the theatre for each show. There will be eight shows per week and it is projected that the show will run for 100 weeks. Tickets sell for $50 and the theatre has 800 seats. It is expected that 80% of the seats will be sold for each show.

Answer 1

1.  . Under the current scenario, Madison Production Company can expect total profit of $ 2,48,00,000. The company needs the show to run for 20 Twenty weeks in order to break even.   

2. In order to earn a net profit of at least $21,000,000 by running the show for 90 weeks, the company must sell the tickets for at least $47.15.

3. If MPC can lower the ticket price to $40 (all else remaining the same), then 6 ( Six ) additional weeks are needed for the company to break even.

4. On the other hand, if MPC can raise the ticket price to $55 (all else remaining the same), net profit will be $ 2,73,60,000 and the company will need 19 ( Nineteen) weeks to break even.

5. The Madison Production Company will need to run the show for 20 ( Twenty ) weeks in order to recover the development cost of the show. I used Net Revenue earned per week divided by devlopment cost ( Fixed Cost ) to determine this.

Net Revenue Earned per week : ( Total Occupancy* Ticket Price) - Variable Cost per Show.

E.g :

8 shows per week . 100 Weeks. Average Occupancy per Show : 640 seats ( 800* 80%).

=100*8*640 seats i.e  512000 Tickets.