Reference no: EM132977995

Question - The newspapers advertised that every boxer in a boxing match middleweight would receive a payment of $ 2.5 million in cash. The fight would be aired on private circuit television. The central promoter, Lee Way would collect 100% of the proceeds and pay 30% to the individual local promoters. Way expected to sell 1.1 million seats at an average net price of $ 13 each. Way was also to receive US $ 300,000 from Madison Square Garden (which had sold all of its 19,500 seats at prices ranging from US $ 150 ring-side to US $ 20, resulting in gross income in the amount of US $ 1.25 million); Way would not share the $ 300,000 with local developers. It asks:

1. Lee Way is trying to decide how much to spend on advertising, What is the highest amount that Way could spend and break even in global operations assuming sales equal 1.1 million tickets?

2. If Way wanted an operating profit of $ 500,000, how many seats would he have to sell? Suppose the average price was $ 13 and the total fixed costs were $ 8 million.