What assumptions were necessary to compute the predicted 2009 operating income i

Question

What assumptions were necessary to compute the predicted 2009 operating income in requirement 2? Marge Porter is the manager of Stanford's traditional Sunday Flicks. Each Sunday, a film has two showings. The admission price is deliberately set at a very low $3. She sells a maximum of 500 tickets for each showing. The rental of the auditorium is $330 and labor is $435, including $90 for Porter. Porter must pay the film distributor a guarantee, ranging from $300 to $900, or 50% of gross admission receipts, whichever is higher. Before and during the show, she sells refreshments; these sales average 12% of gross admission receipts and yield a contribution margin of 40%. On June 3, Porter screened Little Miss Sunshine. The film grossed $2,250. The governance to the distributor was $750, or 50% of gross admission receipts, whichever is higher. What operating income was produced for the Students' Association, which sponsored the showings? Recompute the results if the film grossed 51,400. The "four-wall" concept .is increasingly being adopted by movie producers. In this plan, the movie's producer pays a fixed rental to the theater owner for, say, a week's showing of a movie. As a theater owner, how would you evaluate a "four-wall" offer? Many churches sponsor bingo games, a tradition stemming from the time when only specific nonprofit institutions were allowed to sponsor games of chance. Reverend Justin Olds, the pastor of a new parish in Orange County, is investigating the desirability of conducting weekly bingo nights. The parish has no ball, but a local hotel would be willing to commit its hall for a lump-sum rental of $600 pet night. The rent would include cleaning, setting up and taking down the tables and chairs, and so on.

Explanation / Answer

           1 Details Amt $ Refreshment sold @12% of 2250                       270 Contribution @40%=                       108 Details Amt $ Gross Receipt                   2,250 Less Gauarantee (higher of $750 & $1125)                 (1,125) Rental                    (330) Labor=                    (435) Contribution from refreshment sale =                       108 Operating income                       468            2 Details Amt $ Refreshment sold @12% of1400                       168 Contribution @40%=                         67 Details Amt $ Gross Receipt                   1,400 Less Gauarantee (higher of $750 & $700)                    (750) Rental                    (330) Labor=                    (435) Contribution from refreshment sale =                         67 Operating income/(loss)                       (48)            3 From theatre owners point of view , the four wall offer may be evaluated from the value of rental. If the value of rental exceeds the operating   income receivable considering average audience and average operating costs, then the offer can be   accepted . However , if the rental is too low in comparison to average operating income being earned by the theatre , the offer may be declined. However, a risk averse owner may think of   accepting the over if the return provides an   acceptable margin as it eliminates the unceratainty of ticket sale.

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