Steel car orchestra would like stage an event. Fixed costs for the event total $
ID: 2569157 • Letter: S
Question
Steel car orchestra would like stage an event. Fixed costs for the event total $5,000. Tickets will sell for $15 per person, and the promoter responsible for processing ticket orders charges the orchestra a fee of $2 per ticket. Steel star orchestra expects to sell 500 tickets a) Calculate the fillowing :
1. How many tickets must steal star sell to breakeven
2. How many tickets must steel star sell to earn a profit of $7,000?
3. How much tickets must steel star have in sales dollar to break even?
4. How much must steel star have in sales dollar to earn a profit of $7,000?
5. What is the orchestra margin of safety in units and sales dollar?
b) What is sensitivity analysis and how might it help those performing cost- volume- profit analysis ?
Explanation / Answer
1.How many tickets must Steal Star sell to breakeven
Contribution per Ticket = Selling Price per Ticket- Variable Cost per Ticket
=$15.00-$2.00
=$13.00
Break even in tickets= Fixed Cost / Contribution per Ticket
=$5,000/$13.00
=384.61 or 385 ticket
2.How many tickets must steel star sell to earn a profit of $7,000?
Desired Sales tickets= Target Profit +Fixed Cost / Contribution per Ticket
=$7,000+$5,000/$13.00
=$12,000/$13.00
=923.07 or 924 tickets
3.How much ticket must steel star have in sales dollar to break even?
Contribution margin % = Contribution per Ticket / Selling Price
=$13.00/$15.00
=86.67%
Break even sales in Dollars= Fixed Cost/ Contribution margin %
= $5,000/86.67%
= $ 5,769
4.How much must steel star have in sales dollar to earn a profit of $7,000?
Desired Sales tickets= Target Profit +Fixed Cost / Contribution margin %
=$7,000+$5,000/86.67%
=$12,000/86.67%
=$13,846
Answered first 4
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