Final Answer:
1. Revenue per show: $36,000; Variable expenses per show: $28,200
2. Number of shows needed annually to break even: 35 shows
3. Number of shows needed annually to earn a profit of $468,000: 60 shows. Achieving this goal may be challenging due to logistical and operational constraints.
Step-by-step explanation:
1. Revenue and Variable Expenses per Show:
Revenue per show = Number of tickets sold * Ticket price = 800 * $45 = $36,000.
Variable expenses per show:
Cast payments: 70 cast members * $300 = $21,000.
Program printing costs: $9 * 800 guests = $7,200.
Total variable expenses per show = $21,000 + $7,200 = $28,200.
2. Number of Shows Needed Annually to Break Even:
Income statement equation: Revenue per show = Variable expenses per show + Fixed expenses / Number of shows.
Fixed expenses = $273,000.
Using the formula: $36,000 = $28,200 + $273,000 / Number of shows.
Rearranging the equation gives us: Number of shows = $273,000 / ($36,000 - $28,200) = $273,000 / $7,800 ≈ 35 shows.
3. Number of Shows Needed Annually to Earn a Profit of $468,000:
Shortcut unit contribution margin approach:
Desired profit = (Revenue per show - Variable expenses per show) * Number of shows.
Desired profit = $468,000.
Contribution margin per show = $36,000 - $28,200 = $7,800.
Number of shows = Desired profit / Contribution margin per show = $468,000 / $7,800 ≈ 60 shows.
Given the current constraints and calculations, there might be challenges in achieving a profit of $468,000 by only adjusting the number of shows. Factors such as audience demand, production capacity, and logistical constraints could make reaching this goal purely through show numbers unrealistic without additional changes, such as increasing ticket prices or reducing other costs.
Complete Question
A traveling production of The Utile Mermaid performs each year. The average show sells 800 tickets at $45 per ticket. There are 100 shows a year The show has a cast of 70, each earning an average of $300 per show. The cast is paid only after each show. The other variable expense is program printing costs of $9 per guest. Annual fixed expenses total $273,000.
1. Compute revenue and variable expenses for each show
2. Use the income statement equation approach to compute the number of shows needed annually to break even
3.Use the shortcut unit contribution margin approach to compute the number of shows needed annually to earn a profit of $468,000. Is this goal realistic? Give your reason.