Question

City Productions performs London shows. The average show sells 1,300 tickets at $60 per ticket. There are 145 shows per year. No additional shows can be the theater is also used by other production companies. The average show has a cast of 65, each earning a net average of $340 per show. The cast is paid at show. The other variable cost is program-printing cost of $8 per guest. Annual fixed costs total $728,000 Requirements 1. Compute revenue and variable costs for each show 2. Use the equation approach to compute the number of shows City Productions must perform each year to break even. 3. Use the contribution margin ratio approach to compute the number of shows needed each year to earn a proft of $5,687,500. Is this profit goal realistic? your reasoning 4 Prepare City Productions's contribution margin income statement for 145 shows performed in 2016. Report only two categories of costs: variable and fixed Requirement 1. Compute revenue and variable costs for each show Select the formula and enter the amounts to compute sales revenue for each show Sales revenue per show Select the formula and enter the amounts to compute variable costs for each show. Compute the va the total variable costs per show Compute the variable costs per show for each cost separately, and then comput Variable costs per show Cost of programs Cost of performers Total variable costs Reauirament 2 UIlsn thn enuation annroach to nomnsute the numher of shows Gity Produntions must nerform each vear to hreak avan Choose from any list or enter any number in the input fields and then continue to the next question

Answer 1

Answer 1:

Sales Revenue:

Variable costs:

Answer 2:

Formula to compute the required sales in units to break even:

First formula as required:

Rearranging the above to compute number of shows to break even:

= Fixed Cost / (Sales revenue per show - Variable costs per show)

= $728,000 / ($78,000 - $32,500)

=16

The number of shows needed annually to break even is 16

Answer 3:

Contribution margin = Sales per show - Variable cost per show = $78,000 - $32,500 = $45,500

Contribution margin in % = Contribution margin / Sales = $45,500 / $78,000 = 58.33%

Required sales in dollars to earn target profit of $5,687,500 = $10,998,628

Number of shows needed each year to earn a profit of $5,687,500 = $10,998,628 / Sales revenue per show = $10,998,628 / $78,000 = 141 (Rounded off)

The number of shows needed annually to earn a profit of $5,687,500 is 141

The profit goal of $5,687,500 is realistic since City Productions currently performs 145 shows a year.

Answer 4:

City Production performs 145 shows per year.

Sales Revenue = 145 * $78,000 = $11,310,000

Variable costs = 145 * $32,500 = $4,712,500

Contribution margin = $11,310,000 - $4,712,500 = $6,597,500

Operating profit = Contribution margin - Fixed cost = $6,597,500 - $728,000 = $5,869,500