Answer:
a. What is the estimated contribution margin per ticket sold for the benefit concert?
contribution margin per ticket = ($15.50 + $2 + $17) - ($6 + $2.55 + $7) = $34.50 - $15.55 = $18.95
b. What are the estimated total fixed costs for the benefit concert?
total fixed costs = $21,000 + $85,000 = $106,000
c. What is the estimated profit from the benefit concert if 10,500 tickets are sold?
estimated profit = (10,500 x $18.95) - $106,000 = $92,975
d. How many tickets must be sold in order for concert profit to be $100,000?
number of tickets sold = ($106,000 + $100,000) / $18.95 = 10,870.71 ≈ 10,871 tickets sold
e. Assuming a tax rate of 31% on profits from the concert, what must dollar ticket sales be in order for after-tax concert profits to be $100,000?
$100,000 / (1 - 31%) = $144,927.54
number of tickets sold = ($106,000 + $144,927.54) / $18.95 = 13,241.56 ≈ 13,241.56 tickets sold
f. Assume that the organizers can negotiate the fixed payment for the pavilion's operating expenses. If the organizers expect to sell 10,500 tickets, how much can they afford to pay and still earn a profit of $100,000 (ignore taxes)?
contribution margin increases to $18.95 + $7 = $25.95
10,500 = ($21,000 + $100,000 + ?) / $25.95
$272,475 = $121,000 + ?
? = $151,475
you can pay up to $151,475 in fixed expenses to the pavilion
