Question

1).If the Classical Music Society just breaks even, how many concerts does it hold? 2).In addition to the organization's artistic director, the Music Society would like to hire a marketing director for $39,000 per year. What is the breakeven point? The Music Society anticipates that the addition of a marketing director would allow the organization to increase the number of concerts to 54 per year. What is the Music Society's operating income/(loss) if it hires the new marketing director? 3).The Music Society expects to receive a grant that would provide the organization with an additional $13,000 toward the payment of the marketing director's salary. What is the breakeven point if the Music Society hires the marketing director and receives the grant?

Answer 1

1) 30 concerts per year

2) If new marketing director is hired, the new break even point = 53 concerts per year.

If 54 concerts are made during the year, operating income = $1,800

3) 46 concerts per year

Step-by-step explanation:

The first part of the question is missing:

"The lease payments on the concert hall are expected to be $4,000 per month. The organization pays its guest performers $1,800 per concert and anticipates corresponding ticket sales to be $4,500 per concert. The music society also incurs costs of approximately $1,000 per concert for marketing and advertising. The organization pays its artistic director $33,000 per year and expects to receive $30,000 in donations in addition to its ticket sales."

total fixed costs = salaries ($33,000) + rent ($4,000 x 112) = $81,000

net fixed costs = $81,000 - $30,000 (donations) = $51,000

contribution margin = ticket revenue - variable costs = $4,500 - ($1,800 + $1,000) = $4,500 - $2,800 = $1,700

break even point in units = $51,000 / $1,700 = 30 concerts per year

If new marketing director is hired, net fixed costs increase to $90,000:

new beak even point = $90,000 / $1,700 = 52.94 ≈ 53 concerts

if there are 54 concerts, operating income = (54 x $1,700) - $90,000 = $1,800

if the grant is received, then net fixed costs = $90,000 - $13,000 = $77,000

break even point = $77,000 / $1,700 = 45.29 ≈ 46 concerts