Question

Starry Point Music is a not-for-profit organization that brings guest artists to the city. Starry just leased a concert hall for next year's performances, lease payments are $1,000 per month for all 12 months of the year. The society has two types of performances: solo artists and small ensembles. The amount that will be charged for tickets for each type of performance is $320 for solo artists and $420 for ensembles. The only variable costs are marketing and hourly wages and those are estimated at $20 per ticket for both types of performances. The society has scheduled twice as many ensemble performances as solo artists. In addition to the lease costs for the concert hall, the only other fixed cost is the salary of he Artistic Director at $98,000per year. How many tickets for each type of performance must be sold for the Society to break even?

Answer 1

BREAK EVEN POINT: Break Even Point is the point where company’s profit is equals to company’s expense. It is a situation of no loss and no profit.

FORMULA:

BREAK EVEN POINT = Fixed Costs ÷ Contribution Margin

Contribution Margin = Price of Product – Variable Costs

In the given Problem,

Fixed cost is =

Lease payment = $ 1000 per month for 12 months = $ 12,000 per year

Salary of Artistic Director = $ 98,000 per year

Total Fixed cost = $ 110,000

Price of the Product = $ 320 per ticket for solo artists

                                    $ 420 per ticket for ensembles

Variable Cost = $ 20 per ticket for both type of performances

Contribution Margin (for solo artists) = $ 320 - $ 20 = $ 300

Contribution Margin (for ensembles) = $ 420 - $ 20 = $ 400

Break Even point = 110,000/300 = 366 tickets of solo artist

                                    Or

                                110,000/400 = 275 tickets of ensembles

For break even, means where company has no profit no loss, company must sold 366 tickets of solo artists or 275 tickets of ensembles.