A traveling production of The Lion King performs each year. The average show sel

Question

A traveling production of The Lion King performs each year. The average show sells 1,600

tickets at $50 per ticket. There are 110 shows each year. The show has a cast of 60?, each earning an average of $350 per show. The cast is paid only after each show. The other variable expense is program printing costs of $7 per guest. Annual fixed expenses total

$$717,000.

Using the equation you determined? above, solve for the target number of shows.

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 $3,824,000

Is this goal? realistic? Give your reason.

4.

Prepare The Lion King?'s contribution margin income statement for 110 shows each year. Report only two categories of? expenses: variable and fixed.

.

The profit goal of $3,824,000

Is unrealistic or realistic since

The Lion King currently performs110 shows a year.

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 $3,824,000

Is this goal? realistic? Give your reason.

4.

Prepare The Lion King?'s contribution margin income statement for 110 shows each year. Report only two categories of? expenses: variable and fixed.

.

Explanation / Answer

Solution 1:

Revenue for each show = 1600 * $50 = $80,000

Variable expense per show = 60 * $350 + 1600*$7 = $32,200

Solution 2:

Let number of show needed to break even = X

Now

$80,000X - $32,200X = $717,000

X = 15 shows

Solution 3:

Target profit = $3,824,000

Target contribution = $3,824,000 + $717,000 = $4,541,000

Contribution margin per show = $80,000 - $32,200 = $47,800

Nos of shows required to earn target profit = Target contribution / Contribution margin per show

= $4,541,000 / $47,800 = 95 shows

Solution 4:

Solution 5:

The profit goal of $3,824,000 is realstic since Lion king currently performs 110 shows a year.

Contribution margin income statement - Lion King Particulars Amount Sales Revenue ($80,000*110) $8,800,000.00 Variable Expenses ($32,200*110) $3,542,000.00 Contribution margin $5,258,000.00 Fixed Expenses $717,000.00 Net Income $4,541,000.00

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