A local movie theater owner explains to you that ticket sales on weekends and ev

Question

A local movie theater owner explains to you that ticket sales on weekends and evenings are strong, but attendance during the weekdays, Monday through Thursday, is poor. The owner proposes to offer a contract to the local grade school to show educational materials at the theater for a set charge per student during school hours. The owner asks your help to prepare a CVP analysis listing the cost and sales projections for the proposal. The owner must propose to the school's administration a charge per child. At a minimum, the charge per child needs to be sufficient for the theater to break even. Required Your team is to prepare two separate lists of questions that enable you to complete a reliable CVP analysis of this situation. One list is to be answered by the school's administration, the other by the owner of the movie theater.

Explanation / Answer

Solution-

Here are the formulas to calculate Break-even point.

Contribution=Sales-Variable cost per unit

Lists of questions by the owner of the movie theater-

What is the

Sales units and sales price at the weekdays?

Fixed Costs?

In this way ,the owner can know about the cost covered and loss/profit on the weekends and evening.

Lists of questions by the school's administration-

No. of students which will see the education material at the theater?

on the basis of this data ,CVP analysis can be done and the owner can propose required charges per student for BEP or earn a profit.

S. No. Item Formula 1 Break Even Units Fixed Cost / Contribution per unit 2 Break Even Sales($) Fixed Cost / (CPM/Sales per unit)

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