Question

A theatre has two types of seats: regular seats sell for $16 and box seats sell for $20. Variable costs are $10 per seat, regardless of the type of seat. The theatre has 450 regular seats and 50 box seats and the seats and the seats are solid in the same ration, Fixed costs are per month $48,000.

1) What is the breakeven point in number of seats per month?

2) What is the breakeven point in sales per month?

3) Create the breakeven contribution income statement for one month.

Personal Note: I've been working on this problem for a LONGTIME and I cannot understand it :(

Answer 1

• Working required for ‘Weighted average contribution margin’

		Regular Seats	Box Seats	Total
A	Sale price per unit	$16	$20
B	Variable cost per unit	$10	$10
C = A - B	Contribution margin per unit	$6	$10
D	No if units	450	50	500
E = D/500	Sales Mix % of total seats	90%	10%
F = C x E	Weighted average contribution margin per unit	$5.40	$1.00	$6.40

• Requirement 1

A	Total Fixed Cost	$48,000
B	Weighted average contribution margin per unit	$6.40
C = A/B	Break even point in number of seats	7500	Answer [1]

• Requirement 2

		Regular Seats	Box Seats	Total
A	Break even point in number of seats	7500	7500
B	Sales Mix % of total seats	90%	10%
C = A x B	Break even units	6750	750	7500
D	Sale price per unit	$16	$20
E = C x D	Break even point in sales per month	$108,000	$15,000	$123,000	Answer [2]

• Requirement 3

		Regular Seats	Box Seats	Total
A	Sales Revenue	$108,000	$15,000	$123,000
B	Variable cost	$67,500	$7,500	$75,000
C = A - B	Contribution margin	$40,500	$7,500	$48,000
D	Fixed Cost			$48,000
E = C - D	Net Operating Income			$0