Question

 

XYZ operates a movie theater. A movie ticket is $16.00 per ticket, and costs nothing. On average 40% of the customers will buy a soda ($6 each, cost $1); 60% will buy food ($6 average price with a cost of $2). The fixed costs are $387,600.

1. Calculate the break-even quantity and $sales for tickets, soda and food(10 points)  
2. The theater wishes to make $96,900 profit. Calculate the target profit quantity and sales for tickets, soda and popcorn (10 points)

Make sure to show your weighted average calculations, "bundle" calculations, and final answers.

Answer 1

Quest: XYZ operates a movie theater. A movie ticket is $16.00 per ticket, and costs nothing. On average 40% of the customers will buy a soda ($6 each, cost $1); 60% will buy food ($6 average price with a cost of $2). The fixed costs are $387,600.

1. Calculate the break-even quantity and $sales for tickets, soda and food(10 points)  
2. The theater wishes to make $96,900 profit. Calculate the target profit quantity and sales for tickets, soda and popcorn (10 points)

Make sure to show your weighted average calculations, "bundle" calculations, and final answers.

Solution:

Contribution Margin= Sales- Variable costs

Particulars	Sales	variable cost	Contribution Margin	Sales Mix	Weighted Average Contribution(Contribution Margin*sales mix)
Tickets	16	0	16	1	16
soda	6	1	5	0.40	2
Food	6	2	4	0.60	2.40
	Total				20.40

Break-even Sales Units= Fixed costs/ contribution Margin

=> 387,600/20.40

=> 19,000 Units

Break-even point (in dollars)= Break even sales*sales price*sales mix{for each type}

19,000*{16*1+6*0.40+6*0.60}

= 19,000*{16+2.40+3.60}

=>19000* 22

=> 418,000

2. target profits in case of 96,900 Profits

=> profit+fixed costs/Weighted average contribution

=> 96,900+387,600/20.40

=> 484,500/20.40

=> 23,750

units for tickets= 1/2*23,750

=> 11,875

Units for soda= 0.40/2.00*23,750

=> 4,750

Units for food= 0.60/2*23,750

=> 7,125