Question

A traveling production of Chicago performs each year. The average show sells 900 tickets at $55 per ticket. There are 120 shows each year. The show has a cast of 50, each earning an average of $300 per show. The cast is pa only after each show. The other variable expense is program printing costs of $6 per guest. Annual fixed expenses total $1,105,800. Read the requirements Requirements Requirement 1. Compute revenue and variable expenses for each show. The revenue for each show is $ The variable expenses for each show are $ 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 $2,968,200 Is this goal realistic? Give your reason 4. Prepare Chicago's contribution margin income statement for 120 shows each year. Report only two categories of expenses: variable and fixed. Requirement 2. Use the income statement equation approach to compute the number of shows needed annually to break even. Begin by determining the basic income statement equation. = Operating income Using the basic income statement equation you determined above, solve for the number of shows to breakeven. Print Done The number of shows needed annually to break even is

Answer 1

Answer to 1st:

Revenue for each show = 900 tickets * $55 = $49,500

Variable expense for each show = (50 * $300) + (900 * $6) = $20,400

Answer to 2nd:

Basic Income statement equation: Revenue - Variable costs - Fixed costs = Operating Income

Number of shows needed to breakeven are computed as follows:

(No. of shows) * $49,500 - (No. of shows) * $20,400 - $1,105,800 = 0

No. of shows = 38

Answer to 3rd:

Formula: (Fixed Costs + Target profit) / Contribution margin per unit = Target # of shows

Contribution margin per show = Sales - V.C. = $49,500 - $20,400 = $29,100

The number of shows needed annually to earn a profit of $2,968,200 is 140 calculated as follows:

Target # of shows = ($1,105,800 + $2,968,200) / $29,100

Target # of shows = 140

The profit goal of $2,968,200 is not met since Chicago currently performs 120 shows a year.

Answer to 4th:

Chicago
Contribution Margin Income Statement
Year Ended December 31
Revenue	59,40,000
Less: Variable expenses	-24,48,000
Contribution Margin	34,92,000
Less: Fixed expenses	-11,05,800
Net operating income	23,86,200