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David Young, a theater owner wants to secure the rights to exhibit the movie "Star Wars XIII". He has already decided to offer a 90%, 70%, and 50% sliding scale over the three week period (Theater owners pay a % of box office to the distributor). The weekly fixed "house expenses" for rent, climate control, personnel, and advertising, and other items are $5,000. Allowing for lower prices for children, senior citizens and matinees, the average price per ticket is $6.
Required:
Question a. What is the expected operating income for the three week run?
Question b. Find the breakeven volume as the volume where contribution margin equals the fixed cost.
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