Concept explainers
Famous Productions performs London shows. The average show sells 1,000 tickets at $60 per ticket. There are 175 shows a year. No additional shows can be held as the theater is also used by other production companies. The average show has a cast of 60, each earning a net average of $320 per show. The cast is paid after each show. The other variable cost is a program-printing cost of $8 per guest. Annual fixed costs total $459,200.
Requirements
- 1. Compute revenue and variable costs for each show.
- 2. Use the equation approach to compute the number of shows Famous 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 profit of $4,264,000. Is this profit goal realistic? Give your reasoning.
- 4. Prepare Famous Production’s contribution margin income statement for 175 shows performed in 2018. Report only two categories of costs: variable and fixed.
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