Silver Screen. Inc. owns and operates a nationwide chain of movie theaters. The 500 properties in the Silver Screen chain vary from low-volume. small-town, single-screen theaters to high-volume. urban. multiscreen theaters. The firm’s management is considering installing popcorn machines. which would allow the theaters to sell freshly popped corn rather than prepopped corn. This new feature would be advertised to increase patronage at the company’s theaters. The fresh popcorn will be sold for $ 1.75 per tub. The annual rental costs and the operating costs vary with the size of the popcorn machines. The machine capacities and costs are shown below. (Ignore income taxes.)
Popper Model | |||
Economy | Regular | Super | |
Annual capacity | 45,000 tubs | 90.000 tubs | 140,000 tubs |
Costs: | |||
Annual machine rental | $ 8,000 | $ 11.00 | $ 20,000 |
Popcorn cost per tub | .13 | .13 | .13 |
Other costs per tub | 1.22 | 1.14 | 1.05 |
Cost of each tub | .08 | .08 | .08 |
Required:
1.Calculate each theater’s break-even sales volume(measured in tubs of popcorn) for each model of popcorn popper.
2.Prepare a profit-volume graph for one theater. assuming that the Super Popper is purchased.
3.Calculate the volume (in tubs) at which the Economy Popper and the Regular Popper earn the same profit or loss in each movie theater.
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