Answer:
England Productions
1. Revenue and Variable costs for each show:
Revenue = 1,300 x $60 = $78,000
Variable costs =
Direct labor = $340 x 65 = $22,100
Direct materials = $8 x 1,300 = $10,400
Total variable costs = $32,500
2. The number of shows to perform each year to break-even, using the income statement equation approach:
to break even, the Total Revenue = Total Costs
Total Revenue per annum = $78,000 x 150 shows = $11,700,000
Total Costs = Fixed Costs + Variable Costs
Total costs per annum = $728,000 + $32,500 x 150 shows = $5,603,000
Therefore, to break even, total revenue must be equal to $5,603,000
3. Contribution Margin approach to earn a profit of $5,687,500
Contribution per show = Revenue minus Variable Costs
Contribution = $78,000 - $32,500 = $45,500
To earn a profit of $5,687,500, the number of shows will be equal to fixed costs + profit divided by contribution margin per show
($728,000 + $5,687,500) / $45,500 = 141 shows.
4. England Productions' Contribution Margin Income Statement for 150 shows performed in 2012:
Sales Revenue $11,700,000 ($78,000 x 150)
Variable costs $4,875,000 ($32,500 x 150)
Contribution Margin $6,825,000
Fixed Costs $728,000
Net Profit $6,097,000
Explanation:
Contribution is the difference between sales revenue and variable costs. It is a profit element obtained before fixed costs are deducted.
