Budget Rouge Orchestra incurs $1.9 million in annual fixed costs. The variable cost for each person attending one of the Orchestra’s performances is $11.60. The Orchestra facility has 3 sitting options for its visitors: (1) VIP Seats, (2) General Seats, and (3) Balcony Seats. The Orchestra charges $400 per person for VIP seats, $150 per person for General seats, and $100 per person for Balcony seats. Generally, 10% of their patrons buy VIP seats, 75% buy General Seats, and the rest of patrons buy Balcony seats.
Questions: 1. How many people must buy tickets each year for the Orchestra to break even? Assume that the seats’ mix does not change. Show all of your calculations and answer the question in a complete sentence. 2. How many “General Seats” will be sold at the break even?
| Calculation of weighted average contribution margin | ||||
| VIP | General | Balcony | Total | |
| Selling price | 400 | 150 | 100 | |
| Less: Variable cost | 11.6 | 11.6 | 11.6 | |
| Contribution Margin per seat | 388.4 | 138.4 | 88.4 | |
| Sales Mix | 10% | 75% | 15% | |
| Weighted average contribution Margin | 38.84 | 103.8 | 13.26 | 155.9 |
| Break even tickets = Fixed costs/Weighted average contribution margin | ||||
| 1900,000/155.9 | ||||
| 12187.30 | Tickets | |||
| General Seats = 12187.30*75% | 9140 | Tickets | ||
Budget Rouge Orchestra incurs $1.9 million in annual fixed costs. The variable cost for each person attending one of the...