Reference no: EM132547457

Iqra University is planning a concert university.

The university is considering a selling price for tickets at either RS 2,000 or RS 4,000 each

The following are the estimated costs of the proposed concert

RS

Advertising                                                                                250,000

Wages of Iqra University Personnel employed at the concert               600,000

Printing of tickets                                                                       350,000

Fee of singer                                                                           2,500,000

Ticket sellers, security                                                                 200,000

Printing of tickets                                                                     500,000

Required:

Question i. Calculate the number of tickets which must be sold at each price to achieve break-even point, if the singer agrees to change from fixed fee of RS 2.5 million to a fee equal to 25% of the contribution margin.

 

Question ii. Calculate the level of ticket sales for each price, at which the company would be indifferent as between the fixed and percentage fee alternative.

 

Question iii. Comment on the factors, which you think, the company might consider in choosing between the fixed fee and percentage fee alternative.