Calculate the number of performances of each ballet required

Assignment Help Corporate Finance

Reference no: EM13948746

Utah Metropolitan Ballet is located in Salt Lake City. The company is housed in the Capitol Theater, one of three buildings that make up the Bicentennial Arts Center in downtown Salt Lake City. The ballet company features five different ballets per year. For the upcoming season, the five ballets to be performed are The Dream, Petrushka, The Nutcracker, Sleeping Beauty, and Bugaku.

The president and general manager has tentatively scheduled the following number of performances for each ballet for the coming season:

Dream 5

Petrushka 5

Nutcracker 20

Sleeping Beauty 10

Bugaku 5

To produce each ballet, costs must be incurred for costumes, props, rehearsals, royalties, guest artist fees, choreography, salaries of production staff, music, and wardrobe. These costs are fixed for a particular ballet regardless of the number of performances. The direct fixed costs follow for each ballet.

Dream Petrushka Nutcracker Sleeping Beauty Bugaku

$275,500 $145,500 $70,500 $345,000 $155,500

Other fixed costs are incurred as follows:

Advertising	$ 80,000
Insurance	15,000
Administrative salaries	222,000
Office rental, phone, and so on	84,000
Total	$401,000

For each performance of each ballet, the following costs are also incurred:

Utah symphony	$3,800
Auditorium rental	700
Dancers' payroll	4,000
Total	$8,500

The auditorium in which the ballet is presented has 1,854 seats, which are clas- sified as A, B, and C. The best viewing ranges from A seats to C seats. Information concerning the different types of seat follows:

	A Seats	B Seats	C Seats
Quantity	114	756	984
Price	$35	$25	$15
Percentage sold for each performance:*
Nutcracker	100	100	100
All others	100	80	75

*Based on experience, the same percentages are expected for the coming season.

Required

1. Compute the expected revenues from the performances that have been tentatively scheduled. Prepare a variable-costing income statement for each ballet.

2. Calculate the number of performances of each ballet required to produce the revenues needed to cover each ballet's direct fixed costs.

3. Calculate the number of performances of each ballet required for the company as a whole to break even. If you were the president and general manager, how would you alter the tentative schedule of performances?

4. Suppose that it is possible to offer a matinee of the popular Nutcracker. Seats would sell for $5 less than in the evening, and the rental of the auditorium would be $200 less. The president and general manager believes that five matinee performances are feasible and that 80 percent of each type of seat can be sold. What effect will the matinee have on the company's profitability? On the overall break-even point?

5. Suppose that no additional evening performances can be offered beyond those tentatively scheduled. Assume that the company will offer five matinee perfor- mances of The Nutcracker. Also, the company expects to receive $60,000 in govern- ment grants and contributions from supporters of the fine arts. Will the company break even? If not, what actions would you take to bring revenues in line with costs? Assume that no additional performances of The Nutcracker are feasible.

Reference no: EM13948746

Questions Cloud

What are push and pull factors : What is the meaning of the acronym WASP? What are push and pull factors

Calculate the expected value and standard deviation : Assume that Al pools his losses with Ed's store, which has an identical loss distribution. Ed's losses are independent of Al's. Al and Ed agree to split the total losses in the pool equally. Show the revised probability distribution for the mean l..

Determine the tangential force : Determine the tangential force F and the normal force N acting on the collar when u. = 45°, if the force F maintains a constant angular motion u = 2 rad>s.

Which audit company audited the annual report : What information does the Management Report (Not MD&A) convey? Which audit company audited the Annual Report? Is the MD&A audited?

Calculate the number of performances of each ballet required : Calculate the number of performances of each ballet required to produce the revenues needed to cover each ballet's direct fixed costs.

Compute the amount of net income for 2007 : Based on Eaton Corporation"s financial reports for fiscal 2007, it reported dividends declared and paid of $251 million for 2007. Compute the amount of net income for 2007. Eaton Corporation applies U.S. GAAP, and reports its results in millions o..

Describe the organization and the basic health care services : Choose a specific health care organization that has been in existence since the 1980s (e.g., a for-profit hospital by name; nonprofit hospital by name; governmental clinic; military or VA health care facility by name; Describe the organization and..

What is the probability of default implied by this price : There is a corporate bond that pays a 2% coupon (once a year at the end of the year) that is currently selling for $910 per $1000 in face value. What is the probability of default implied by this price if the recovery rate is 80%?

How this tree is represented as child/sibling implementation : how this tree is represented as child/sibling implementation?

User Account

All Pages