In: Accounting
The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses).
Based on the following revenue and cost information, the organizers would like answers to several questions.
There are three sources of revenue for the concert:
On the expense side, there are also three components:
REQUIRED [ROUND YOUR CM ANSWER TO THE NEAREST
CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST
DOLLAR.]
Part A (8 tries; 8 points)
1. What is the estimated contribution margin per ticket sold for
the benefit concert?
2. What are the estimated total fixed costs for the benefit
concert?
Tries 0/8 |
Part B (8 tries; 8 points)
3. What is the estimated profit from the benefit concert if 9,000
tickets are sold?
4. How many tickets must be sold in order for concert profit to be
$90,000?
5. Assuming a tax rate of 31% on profits from the concert, what
must dollar ticket sales be in order for after-tax concert profits
to be $90,000?
Tries 0/8 |
Part C (4 tries; 4 points)
6. Assume that the organizers can negotiate the fixed portion of
the pavilion's operating expenses. If the organizers expect to sell
9,000 tickets, how much operating fixed costs can they afford to
pay and still earn a profit of $90,000 (ignore
taxes)?
Dear student, we cannot able to post solution more than four subparts of the question as per our policy.
Answer 1
Selling price per ticket sold | $ 16.00 | |
Donation receipt per ticket sold | $ 2.00 | |
Average parking, food, and merchandise revenue per ticket sold | $ 19.00 | |
Revenue per ticket sold | $ 37.00 | |
Less: Variable cost | ||
Variable portion of fees to the popular national group | $ 5.50 | |
Variable portion of parking, food, and merchandise concessions (19*13%) | $ 2.47 | |
Variable portion of operating expenses for the pavilion | $ 6.00 | |
Variable cost per ticket sold | $ 13.97 | |
Contribution margin per ticket sold | $ 23.03 |
Answer 2
Fixed portion of parking, food, and merchandise concessions (19*13%) | $ 23,000 | |
Fixed portion of operating expenses for pavilion | $ 90,000 | |
Estimated total fixed costs | $ 113,000 |
Answer 3
Number of tickets sold | 9,000 | |
Multiply: Contribution margin per ticket sold | $ 23.03 | |
Total contribution margin | $ 207,270 | |
Less: Estimated total fixed costs | $ 113,000 | |
Estimated profit from the benefit concert | $ 94,270 |
Answer 4
Desired profit | $ 90,000 | |
Add: Estimated total fixed costs | $ 113,000 | |
Total contribution margin required | $ 203,000 | |
Divided by: Contribution margin per ticket sold | $ 23.03 | |
Number of tickets must be sold | 8,815 |