Homework Answers
Answer
( Fixed costs - Fixed income) / Contribution margin per concert = Concerts needed to break even
Fixed costs = $79,000
Fixed income = $52,000 (donation received)
Contribution margin per concert = $1,500
Formula to calculate break even point
( $79,000 - $52,000) / $1,500 = break even point
= $27,000 / $1,500 = 18 concerts
18 concerts are to be performed to reach break even
Working notes
1. Calculation of fixed cost:
Annual payment to artistic director = $55,000
Monthly lease payment for the hall = $2,000
So, the annual lease payment = 2,000*12 = $24,000
The total fixed cost will be the sum of the annual payment to the artistic director and annual lease payment.
Fixed costs = 55,000 + 24,000 = $79,000
2. Calculation of contribution margin per concert:
| Selling price per ticket | $2,500 | |
| Variable expenses | ||
| 1.Payment to guest performers per concert | $ 600 | |
| 2.Marketing and advertising expense per per concert | $ 400 | |
| Total variable expense | $ 1,000 | |
| Contribution margin per concert |
Selling price - Variable expense = 2,500 - 1,500 |
$1,500 |
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