(L. OBJ. 2, 3) Break even sales; sales to earn a target operating income; contribution margin income statement [30-45 min]
British Productions performs London shows. The average show sells 1,200 tickets at $50 per ticket. There are 120 shows a year. The average show has a cast of 70, each earning an average of $300 per show. The cast is paid after each show. The other variable cost is a program-printing cost of $7 per guest. Annual fixed costs total $459,000.
Requirements
1. Compute revenue and variable costs for each show.
2. Use the income statement equation approach to compute the number of shows British Productions must perform each year to break even.
3. Use the contribution margin approach to compute the number of shows needed each year to earn a profit of $3,825,000. Is this profit goal realistic? Give your reasoning.
4. Prepare British Productions’ contribution margin income statement for 120 shows for 2011. Report only two categories of costs: variable and fixed.
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