Question

This problem contains three parts. In Part A, you are asked to determine the parameters of the profit equation - CM and FC. You should not move on to Parts B and C until you have completed Part A. The correct profit function parameters will be given to you after you have completed Part A, and you should use them in Parts B and C instead of your own answers. This problem is worth 20 points. Parts A and B are worth eight points each; Part C is worth four points. You must answer all the questions in a part correctly to get the points for that part. You get eight tries on each of the first two parts and four tries on the last part. The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses). Based on the following revenue and cost information, the organizers would like answers to several questions. There are three sources of revenue for the concert: 1. Tickets will be sold for $15.50 each. 2. A large multinational corporation headquartered in Chicago will donate $3.00 per ticket sold. 3. Each concert attendee is expected to spend an average of $20.00 for parking, food, and merchandise. [Assume that everyone who buys a ticket will attend the concert.] On the expense side, there are also three components: 1. A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $5.50 per ticket sold. 2. The organizers will pay several companies to operate the parking, food, and merchandise concessions. They will pay $24,000 plus 14% of all parking, food, and merchandise revenue. 3. The organizers will pay the pavilion $80,000 plus $7.00 per person attending to cover its operating expenses (production, maintenance, advertising, etc.). REQUIRED [ROUND YOUR CM ANSWER TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.] Part A (8 tries; 8 points) 1. What is the estimated contribution margin per ticket sold for the benefit concert? 2. What are the estimated total fixed costs for the benefit concert? Submit Answer Tries 0/8

Answer 1

Based on the information available in the question, we can answer the following:-

Requirement 1:-

The contribution margin per ticket is calculated as :-

Particulars	Amount
Selling price per ticket	15.50
Donation per ticket	3.00
Parking food and merchandise	20.00
Revenue per ticket	38.50
Variable cost per ticket:-
Performance fee	5.50
Parking, food and merchandise op exp($20*14%)	2.80
Pavilion fees	7.00
Total variable costs	15.30
Contribution margin per ticket(Revenue - Variable costs)	23.20

Requirement 2:-

The estimated total fixed costs for the benefit concert are:-

Particulars	Amount
Parking, food and merchandise	24,000
Pavilion operating expenses	80,000
Total fixed expenses	104,000

Requirement 3:-

If 8,000 tickets are sold, profit from the benefit concert is:-

Contribution margin per ticket * 8,000 tickets = $23.20 * 8,000 tickets = $185,600

Less :- Total fixed expense = ($104,000)

Profit from Benefit concert = $81,600

Requirement 4:-

The number of tickets to be sold for concert profit to be $100,000

No.of tickets to be sold = (Fixed costs + Target Profit)/Contribution Margin per unit

=($104,000 +100,000)/$23.20

=$204,000/$23.20

=8,793.10

=8,793 tickets should be sold in order to attain the target profit of $100,000

Kindly post the remaining questions separately so that we can answer them as well. All the best and please let me know if you have any questions via comments :)