Reference no: EM132610406

Raj, CEO of the Toronto Symphony Orchestra hired you as the controller of this expanding enterprise. While you toured the premises, Raj discussed his expansion plans for TSO. The plans for expansion include the construction of a new 800-seat concert hall for use in musical and theatre performances as well as more teaching studios and practice rooms. Raj has partnered with Angela, a drama instructor, to establish the Toronto Theatre Group (TTG) as part of TSO. TTG will use the concert hall (with 800 seats) for rehearsals for four groups (classical theatre, youth theatre, musical theatre, and improvisation). Each group requires three hours per week to rehearse and there are two 12-week sessions in the year-one each in spring and fall. An additional 20 hours per session is devoted to performances. TTG will employ a drama instructor, a vocal instructor and a dance instructor who will each be paid $45,000 annually. Books & learning materials will also be needed at a rate of $80 annually per student. Three part-time employees at $18 per hour will be needed for set assembly for four hours per week for each week that TTG sessions are operating. TSO will incur additional utilities costs of $40 per hour the hall is used. There will be two performances per session for each group and ticket prices for similar performances average $17. The performances are expected to sell at 80% of capacity regardless of student enrolment. Each group is limited to 25 students. Costumes cost an average of $100 per year and will be sold to students at 85% of cost. Set design costs average $5,000 per session per group. Average market pricing is $350 per student.

Question 1 : Raj would like you to determine the break-even number of students if he charges $270 per student per session to stimulate demand.