Calculating breakeven sales and sales to earn a target profit; preparing a contribution margin income statement Famous Productions performs London shows. The average show sells 1,000 rickets at $60 per ticket. There are 175 shows a year. No additional shows can be held as the theater is also used by other production companies. The average show has a cast of 60, each earning a net average of $320 per show. The cast is paid after each show. The other variable cost is a program-printing cost of $8 per guest. Annual fixed costs total $459,200. Requirements Compute revenue and variable costs for each show. Use the equation approach to compute the number of shows Famous Productions must perform each year to break even. Use the contribution margin ratio approach to compute the number of shows needed each year to earn a profit of $4,264,000. Is this profit goal realistic? Give your reasoning. Prepare Famous Productions’s contribution margin income statement for 175 shows performed in 2018. Report only two categories of costs: variable and fixed.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Calculating breakeven sales and sales to earn a target profit; preparing a contribution margin income statement
Famous Productions performs London shows. The average show sells 1,000 rickets at $60 per ticket. There are 175 shows a year. No additional shows can be held as the theater is also used by other production companies. The average show has a cast of 60, each earning a net average of $320 per show. The cast is paid after each show. The other variable cost is a program-printing cost of $8 per guest. Annual fixed costs total $459,200.
Requirements
- Compute revenue and variable costs for each show.
- Use the equation approach to compute the number of shows Famous Productions must perform each year to break even.
- Use the contribution margin ratio approach to compute the number of shows needed each year to earn a profit of $4,264,000. Is this profit goal realistic? Give your reasoning.
- Prepare Famous Productions’s contribution margin income statement for 175 shows performed in 2018. Report only two categories of costs: variable and fixed.
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