England Productions performs London shows. The average show sells 1,300 tickets at$60 per ticket. There are 175 shows per year. No additional shows can be held as thetheater is also used by other production companies. The average show has a cast of65, each earning a net average of $340 per show. The cast is paid after each show. Theother variable cost is a program-printing cost of $8 per guest. Annual fixed costs total$728,000.
1. Compute revenue and variable costs for each show.
2. Use the equation approach to compute the number of shows England Productionsmust perform each year to break even.
3. Use the contribution margin ratio approach to compute the number of showsneeded each year to earn a profit of $5,687,500. Is this profit goal realistic? Giveyour reasoning.
4. Prepare England Productions’s contribution margin income statement for175 shows performed in 2018. Report only two categories of costs: variableand fixed.
Let number of show be ‘x’
Contribution margin Income Statement
For the year ended 2016
Less: Variable cost
Less: Fixed Costs
Net Operating Profit
Scotty’s Scooters plans to sell a standard scooter for $55 and a chrome scooter for $70. Scotty’s purchases the standard scooter for $30 and the chrome scooter for $40. Scotty’s expects to sell one standard scooter for every three chrome scooters. Scotty’s monthly fixed costs are $23,000.
1. How many of each type of scooter must Scotty’s Scooters sell each month to break even?
2. How many of each type of scooter must Scotty’s Scooters sell each month to earn $25,300?
3. Suppose Scotty’s expectation to sell one standard scooter for every three chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or decrease? Why? (Calculation not required.)
Use the following information to complete Short Exercises S20-10 through S20-15.
Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at $70 per person as a one-day entrance fee. Variable costs are $42 per person, and fixed costs are $170,800 per month.
S20-14 Computing margin of safety
Refer to the original information (ignoring the changes considered in Short Exercises S20-12 and S20-13). If Funday Park expects to sell 8,100 tickets, compute the margin of safety in tickets and in sales dollars.
Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold.
1. Wood used to build tables
2. Depreciation on saws and other manufacturing equipment
3. Compensation for sales representatives paid on a salary plus commission basis
4. Supervisor’s salary
5. Wages of production workers
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